Emily Cain: Maine’s real ranking

Posted Aug. 27, 2008, at 7:51 p.m.

For many years policymakers, business leaders, economists and the public have been troubled by reports from the national Tax Foundation, placing Maine first or second nationally in overall tax burden. This, of course, is not a category any state wants to top, but more troubling is that many tax policy experts in the state disputed the ranking and questioned the organization’s methodology, which only led to partisan bickering as opposed to substantive discussions about Maine’s tax structure.

This questionable “highest taxed” designation has detracted from discussions on other economic policies such as higher education opportunities, increasing wages or access to capital – and it turns out this designation was never accurate.

Earlier this month, the Tax Foundation re-released its tax burden numbers with new data and adjusted its methodology to create a more accurate picture of tax burden in the states. In the new analysis, the Tax Foundation has moved Maine’s rank to 15th, not first. Further, it adjusted prior years to account for the old methodology’s inaccuracies.

In essence, the foundation has been counting property and other taxes paid by people from out of state as taxes paid by Maine residents. Because our state has more tourists and a larger number of out-of-state homeowners than others, Maine’s tax burden as calculated by the foundation has been skewed very high.

By taking into account this “exported tax burden,” a true picture of the state’s tax burden emerges.

That picture shows that in actuality Maine was never number one in tax burden and has never been higher than fifth, as it was in 2005. That is the same year the Legislature passed LD 1, which was designed to help lower the tax burden. Since then, according to the Tax Foundation, the state has dropped 10 places to 15th, not only dropping our overall burden respective to other states but lowering the actual percent of taxes paid by Mainers in just three years.

The state’s nonpartisan State Planning Office agrees with the Tax Foundation’s analysis that the state’s tax burden is dropping. It reports that Maine’s overall tax burden is the lowest it has been in seven years. Careful and often difficult budget decisions along with the LD 1 tax caps have helped put our state on a path for continued success. Our hard work in the last three years has brought the state’s tax burden to within 0.3 percent of the national average.

This is still not a great ranking, but it shows progress in achieving a lower tax burden. It also makes clear the fact that the biggest driver of Maine’s tax burden is not taxes but wages. Maine’s actual amount of taxes paid by residents is below the national average. It is our low wages — typically 34th-40th in the country — not high taxes, that push up the state’s tax burden. If Maine’s income was simply at the national average of $44,254 (an increase of nearly $6,000 annually) and total taxes paid did not change, the state’s tax burden would drop from 10 percent to 8.6 percent — a full point below the national average.

The key to decreasing our tax burden and strengthening our economy is increasing wages in the state. The 123rd Legislature took strides to do exactly that and I am confident the 124th Legislature will continue that work.

In the last two years, we: increased the minimum wage; passed a bond package, with voter approval, that will invest in research and development to bring high paying jobs to the state and strengthen our infrastructure; gave support to both our university and community college systems; and created incentives for college grads to stay and work in Maine. We accomplished all this while making significant and sometimes painful cuts to the overall state budget.

This will help to lower our tax burden, but more importantly, as it becomes clear that we are not — nor were we ever —“No. 1”, we can turn the discussion from lamenting our low ranking to working together to pursuing opportunities to improve the lives of hard working Mainers.

Ensuring that Maine families have access to a vibrant growing economy with good paying jobs is a far better measure of success than any ranking.


Rep. Emily Cain, a Democrat, represents House District 19 in Orono and serves on the Legislature’s Appropriations Committee.

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