For 10 long years, if not longer, the Maine Legislature has paid lip service to tax reform and relief for Maine people. But actions speak louder than words.
Two years ago, voters vetoed an onerous beverage tax imposed to fund the struggling Dirigo Health program. Most recently, voters handily rejected the majority party’s LD 1495, a complicated plan adding more than 100 new taxes to already strained taxpayers.
Time and again, the majority has proposed legislation that does nothing to address the core problem — wasteful spending coupled with one of the highest tax rates in the nation. And all too often, they defend the indefensible with claims that Republicans have no alternative. That is quite simply untrue.
In the upcoming legislative session, Maine Republicans will continue to fight for tax relief for all Maine people.
More than four years ago, the state paid for a study by the highly regarded Brookings Institution; a study on how to bring prosperity to Maine. As is so often the case, little has been done with that study. We will sponsor a bill that will implement some of the common-sense recommendations in the report.
First, the legislation will move more Mainers out of the highest tax bracket by adjusting the upper income limit 20 percent so hard-working Mainers can earn more before reaching the top rate. This change will result in $19 million in tax savings for some of the most vulnerable taxpayers. Additionally, the bill will reduce the top rate from 8.5 percent to 8 percent. By lowering the rate just 0.5 percent, we will save taxpayers another $50 million. This will mean a combined total of $69 million in much-needed tax relief to struggling Maine families and small businesses.
Any meaningful tax relief and reform package must address spending. The proposed legislation will adopt the Brookings recommendation for an efficiency-oriented commission in state government called the Maine Government Efficiency Commission. This commission would be composed of businesspeople and those with ex-pertise in budgeting and tax policy.
Under our legislation, state statute will direct excess revenue into an already established income tax reduction fund called the Tax Relief Fund for Maine Residents. This fund was created to collect a portion of state surpluses and use them for income tax relief. Unfortunately, the TRF has never been funded.
Our legislation will move the TRF to priority status and direct 20 percent of any future surpluses into the fund. In addition, our bill will direct any savings adopted from the Maine Government Efficiency Commission into the fund. Once enough revenue has been collected in the TRF to reduce the income tax by 0.2 of 1 percent, the income tax reduction will happen automatically. The trigger will remain in place until the top income tax rate is reduced to 6.5 percent.
Critics like Sen. Joe Perry of Bangor, chair of the Taxation Committee and a supporter of the repealed tax reform, dismiss using surpluses, saying we have none. This claim is not true. According to information supplied by the Legislature’s nonpartisan Office of Fiscal and Program Review, we have had extra funding seven of the last eight years. In that time, surpluses have totaled $363 million, $70 million just last year. Had the bill been in effect during the last eight years, income taxpayers would have received $72 million in tax relief from surpluses alone.
Such a trigger is not unprecedented. In 1993, the Maine Legislature adopted just such a trigger to reduce the sales tax from 6 percent to 5 percent, the last time the Legislature reduced broad-based taxes.
Supporters of expanding the sales tax repeatedly have stated that our tax code is out of date. We believe the Legislature’s Tax Committee should consider sunset reviews of our tax code. For decades, special interests have carved out exemptions, but many of these exemptions make good sense. The tax reform just repealed was the product of backroom horse-trading, with winners and losers determined by those politically connected. We believe tax policy should be decided at open, public meetings based on sound policy and with those affected participating.
Comprehensive tax reform and responsible spending are themes that will propel our economy back to the forefront of prosperity and ensure that generations to come can afford to live and work in Maine. It’s time to put our best foot forward and use common sense to construct a tax policy that will revive our economy and put Mainers back to work.
David Trahan, R-Waldoboro, represents parts of Lincoln, Knox and Kennebec counties in the state Senate and led the repeal of tax reform in June. Nichi Farnham of Bangor is the Republican candidate in Senate District 32, which includes Bangor and Hermon.