Nothing but the truth about Maine tax reform

Posted Aug. 07, 2009, at 6:24 p.m.

Tax reform, as recently enacted by the Maine Legislature, represents the first major overhaul to Maine’s tax code in 40 years. Though it has been supported by every major Maine newspaper and a wide range of economists and business leaders, it’s natural that change at this level doesn’t please everyone. Still, it surprises us to see letters to the editor and hear comments that say the bill does things it simply doesn’t. The amount of misinformation out there is staggering.

Even during debate on the House floor, people who should have known better perpetuated myths and untruths. We heard from Republican critics that the bill would place new taxes on carpenters and electricians. It doesn’t. And that candy would now be subjected to three levels of taxation. It isn’t. More recently, House Minority Leader Josh Tardy wrote a column stating that a family with a certain income would “lose big,” when in reality, the bill would lower that family’s income taxes by over $200.

Now the Republican Party is organizing a petition drive to repeal tax reform. Given what we have seen to date, we fear that this campaign will not present tax reform accurately. So we urge you to learn more before you sign anything. One source is www.MaineTaxReform.org.

We offer the following corrections to misinformation you may have already heard:

MYTH: Tax reform will not help low- and middle-income persons or the elderly.

TRUTH: Tax reform directly benefits these populations. Low- and middle-income Mainers will see their overall tax burden (including both sales and income taxes) drop by over 18 percent. Senior citizens are rewarded with a special elderly credit, and those who may have little or no taxable income will receive cash back through a refundable credit.

MYTH: Tax reform is a giveaway to the rich.

TRUTH: Tax reform shares the benefits of reduced tax burden with people of every income group, so that every group sees their overall tax burden drop. But the rich actually see a lower percentage decrease. As a result, the new tax code is more “progressive” than the current code. This means that low- and middle-income residents pay a lower proportion of the overall tax burden than they do now.

MYTH: Taxpayers will be hurt by tax reform’s elimination of personal exemptions and deductions.

TRUTH: Tax reform replaces exemptions and deductions with a smarter system that provides similar benefits using tax credits, which come off your total tax bill, not your adjusted gross income. If you itemize on your federal tax return, Maine’s new “itemized” credit will compensate you. As a result, over 95 percent of Maine taxpayers will see lower income taxes.

MYTH: Any savings in income taxes will be offset by increases in sales taxes.

TRUTH: The net impact of tax reform is to lower the tax burden on Maine residents by over $57 million a year. Income taxes will be reduced far enough so that the vast majority of Mainers (87.4 percent) will have extra money in their pockets after any additional sales taxes are paid, an average of $162.50 per filer.

MYTH: There is no harm in signing a petition for a people’s veto and letting the public decide.

TRUTH: If a people’s veto is put on next June’s ballot, tax reform will not go into effect in January 2010 (in sync with a new tax year), and Mainers will lose $57 million in reduced tax burden, just when we need it most. To sign the people’s veto is a statement that the current level of income taxes is acceptable. We all know that’s not true.

The tax reform bill is not perfect. But it is an important first step and significant enough to be labeled the “Maine Miracle” by the Wall Street Journal. It provides tax relief, but just as importantly, better positions the state for the future. If you are “fed up with taxes,” this bill represents the most positive change in decades.

Rep. John Piotti, D-Unity, is the majority leader of the Maine House of Representatives and former chair of the Legislature’s Taxation Committee. Rep. Patsy Crockett, D-Augusta, is a member of the Taxation Committee.

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