BREWER, Maine — Mainers better get used to large, perennial budget deficits if no serious efforts are made to boost its commercial business and employment sector.
That’s the word from J. Scott Moody, chief economist for The Maine Heritage Policy Center.
Moody and the center’s communications director, Chris Cinquemani, held a press conference at Jeff’s Catering on Wednesday morning to publicize two recent reports from the conservative think tank analyzing job growth or loss in the state’s commercial and noncommercial establishments.
“There’s a firm belief in Augusta that government spending can create economic growth,” said Moody. “Well, when you look at it, that’s a zero sum gain because you can only spend what you’ve taken from another part of the economy, this being the commercial, for-profit sector.”
The policy center released part six of its analysis of business demographics in Maine called Maine Business InsideOut, which uses data from the National Establishment Time-Series database that contains information on 161,251 commercial, not-for-profit and government establishments in Maine between 1989 and 2007.
According to the Time-Series data, Maine’s commercial jobs grew 6.4 percent between 1989 and 2007 to a total of 537,839. Although Maine’s commercial jobs accounted for 81.1 percent of jobs in the state, that figure ranks 40th in the country. Maine’s 6.4 percent increase over that time span ranks 42nd in the nation.
Moody and Cinquemani are advocating the use of more business-friendly tax policies such as flat tax rates and allowing businesses to deduct investments in equipment immediately.
“One simple solution would be to make changes in the income tax code to allow businesses to immediately expense all capital purchases instead of the arbitrary and inefficient depreciation timetables that allow write-offs that take decades,” Moody said.
Maine Center for Economic Policy executive director Christopher St. John said the report’s conclusions were based on faulty assumptions.
“I think the misunderstanding by them is that business investment decisions are primarily dictated by state tax policy. We think the primary driver is the market demand for products and services,” said St. John, who heads the liberal-leaning think tank. “We don’t think changes in state tax policy are the lever that will stimulate our economy. That lever is demand. Other factors are educated work forces, good transportation systems, public health.”