As far as tax policy goes, it’s the ice age. No new taxes or increases will be considered, much less approved, by elected officials, here in Maine or in Washington, D.C., for the foreseeable future. Why? Because high taxes, budget shortfalls and deficits are the root of all economic evil, according to prevailing wisdom in state capitols and Washington.
Forget any argument or facts to the contrary, proposals to shift the burden from one sector of the population to another, or any plan by which more revenue is raised as a means to boost economic growth are off-limits. As long as taxes-as-scapegoat remains a viable political strategy, few elected officials will dare tell the public that increasing taxes, decreasing tax breaks or shifting the tax burden should be on the table for consideration.
In Maine, the consensus is that the state’s business climate is poor, in part because of high taxes. That consensus was reinforced in the fall when Forbes magazine released a ranking of state business climates which had Maine as the worst. But, what if that consensus is wrong?
A more recent study, by Ernest & Young and the Council On State Taxation, had Maine at the top of the heap for business-friendly tax rates.
“Maine imposes the smallest burden on new investment due to factors such as a favorable corporate income apportionment formula that compensates for a relatively high tax rate, a property tax exemption for new equipment and low state and local sales tax rates,” the study found. In other words, there is more than meets the eye with taxes.
The goal of lower taxes should not become an end in itself, like a person losing weight without any regard for health. Maine might someday boast about having the lowest tax rates, but if infrastructure such as roads and bridges has been neglected and if the cost of education makes college out of reach for many, what have we accomplished?
At the federal level, the deficit is the scapegoat onto which the ills of the nation are heaped. Certainly, operating in the red is not a sustainable strategy. Deficit spending is defensible during a recession as a means to jump-start the economy, but an end to such investments must be in sight. So why isn’t new revenue being considered as part of the solution to reaching a balanced budget?
The spending cuts advocated by congressional Republicans in recent budget debates amounted to less than the revenue loss caused by extending the Bush tax cuts for the wealthiest of Americans. Despite hard evidence to the contrary, GOP leaders such as Speaker of the House John Boehner continue to argue that helping the wealthy retain their earnings helps the economy grow.
A similar argument emerged when Democrats talk about ending tax breaks for oil companies. Republicans cast such changes in policy as punitive, rather than explaining them as sensible ways to raise revenue at a time it is needed to pay down the deficit.
The American public is ready for a substantive discussion of tax policy. The choices are not between higher or lower taxes, but between poorly apportioned and justly and effectively apportioned taxes.