This year, the Legislature passed LD 1495, a meaningful, responsible tax reform law that lowers the overall tax burden for almost 90 percent of Mainers, promotes economic development and creates stability for our state budget and revenues. The new tax law lowers the top income tax rate from 8.5 percent to 6.5 percent, and reduces taxes for Mainers in every income category.
It pays for that reduction by a modest expansion in the sales tax to select items, primarily exportable, discretionary items. Because a significant portion of the expansion in sales tax will be paid for by people from out of state, Mainers will pay $57.1 million less in taxes overall, even after taking into account the small increase in sales taxes.
Additionally, we already have cut the state budget by $500 million. And as we struggle to ensure adequate funding for important statewide infrastructure and services, the tax reform law was a responsible, thoughtful and creative approach to bringing down the overall tax burden during a challenging economic climate. It ensures Maine has the ability at the state level to provide the investments, services and infrastructure our communities need and deserve.
Unfortunately, two proposals on the horizon threaten to disrupt this progress and jeopardize the health, safety and future of all our communities. First, a proposed repeal of the tax reform law threatens to delay the benefits of this new law. If enough signatures are collected to put the repeal on the ballot, tax reform implementation will be delayed until after the referendum vote sometime next year. This would mean that the almost 90 percent of Mainers who are slated to see an overall tax cut starting in January 2010 would be denied this much needed relief next year.
A second proposal that threatens our communities and the positive results of tax reform is the “taxpayers bill of rights,” more commonly known as TABOR II. In 2006, the people of Maine joined 20 other states in rejecting this measure, but TABOR is back on the ballot.
TABOR sets spending limits artificially low with no reflection of the needs of our communities. It also drastically hinders the abilities of local people to make their own governance and spending decisions.
The draconian limitations in this proposal mirror the TABOR law implemented in Colorado that left the state with crumbling roads and infrastructure, dramatic cuts to education and reduced immunization rates. Facing such disastrous results, in 2005 Colorado voters placed a five-year moratorium on TABOR. Maine should learn from their lesson by not allowing TABOR to get a foothold in our state.
The current TABOR proposal goes even further than the previous failed measure. It now includes all state revenue: general fund, highway fund, special revenue (fee based services). It sets the limit of the highway fund to 2010 levels, which already is underfunded from where we need to be. TABOR limitations will hamstring the ability of communities to fix the dire condition of our roads, bridges and other transportation infrastructure. Instead of respecting the will of the majority of our residents, TABOR hands control over to a minority who base their decisions on ideology, not the needs of communities.
As state lawmakers, our most basic duty is to ensure public needs — public infrastructure, quality educational opportunities for all, public health and public safety. We currently have an extremely open process of governance that encourages public debate and input. TABOR threatens that process at the state and local level, with potentially disastrous consequences for all of our communities.
With the passage of the recent comprehensive tax reform law, we have moved our state in the right direction by providing tax relief to Mainers, improved the state’s ability to attract investment capital, and increased the stability of state revenues. By defeating TABOR and upholding the tax reform law, we will continue to move in the right direction toward prosperity, fairness and opportunity for all Mainers.
Rep. Jim Martin, D-Orono, represents Maine House District 18 and is a member of the Committee on Business, Research and Economic Development. Rep. Elsie Flemings, D-Bar Harbor, represents Maine House District 35 and is a member of the Committee on Taxation.