Maine’s state tax receipts tell the story of a strong economy.

Income tax collections have exceeded projections by $28.3 million in the first few months of the two year budget cycle that began on July 1, indicating that more people are back to work and wages are rising.

And sales tax revenues is $126 million above the assumptions made last spring, which show that people are not holding back on spending.

Corporate income tax revenue is up $35.3 million, or 60 percent, over budget, and strong gains on Wall Street this year are likely to provide additional tax collections in 2022.

That’s all expected to add up to a $822 million increase in the two-year revenue forecast, which the state uses to keep the budget in balance. And that has led to a call from Republican legislators to give the money back to the people in the form of tax cuts.

But the tax collections tell only part of the story.

Just like the coronavirus itself, the COVID recession touched almost everyone, but it didn’t touch them in the same way. And the recovery is dramatic, but not everyone is rebounding together.

Unemployment is low, but we are still thousands of jobs short of the pre-pandemic level set early 2020. While many Mainers were able to work remotely during the pandemic and never missed a paycheck, thousands of families were forced to choose between a frontline job and the safety of their families.

The virus and the economic disruption disproportionately affected people at the bottom of the wage scale, especially women and people of color. They are not going to be helped by a tax cut.

Some businesses grew during the pandemic. Others continued as they had before. But some businesses, particularly in hospitality and health care, are still struggling to make up for the lost months.

In the aggregate, it’s a strong economy – but no one lives in the aggregate. That’s why lawmakers should look for ways to use the surplus in ways that will help those who were hurt the most. Returning revenue in the form of tax cuts would give the most help to those who suffered the least because they have the most income.

Fortunately, Gov. Mills made a comment last week that shows she understands the problem.

“The increased costs of electricity, home heating fuels, gas at the pump and other necessities are putting a real strain on the budgets of Maine people, which is even more difficult during the harsh winter months,” Mills said. “I would like to examine ways we can use this additional revenue to provide direct financial relief to folks hard hit by these increases to help them through these difficult times.”

There is no evidence to suggest that Maine’s level of taxation is slowing the state’s economy.

Tax rates were cut in 2011 under then-Gov. Paul LePage and have not been increased since then. The state’s economy, as measured by gross domestic product, is growing at the fastest pace in years.

Employers report they are not able to hire enough workers to take full advantage of the growth, and high housing prices statewide make it harder for people who would like to move here and add to our workforce.

In many ways, this really is a strong economy, but this is no time for the state government to declare victory. The pandemic is still raging and the economic aftershocks still reverberate. Until both are behind us, the state should help the people who are still hurting.


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