CONTRIBUTORS

Income tax cut uses smoke and mirrors

Posted April 02, 2012, at 4:28 p.m.

The will of Maine people was upheld last month when the Maine House voted down a measure that would have resurrected the publicly rejected Taxpayer Bill of Rights, or TABOR, proposals. But is the new Augusta a place that learns from its mistakes?

Like the umpteenth sequel to the worst movie ever, it is now rumored that supporters of LD 849 may want to try yet another end-run around Maine voters, schools, the middle class and municipal officials. Like a moth to the flame, the new Augusta seems driven to future tax breaks taking credit now and leaving the real decisions to others later.

With no plan to pay for it, LD 849 would ratchet down the income tax to a flat 4 percent for all taxpayers — cutting state income tax revenue almost in half. In today’s dollars, the losses to our schools, roads, bridges and towns would total over $1.2 billion per biennium. By triggering losses to federally matched programs such as MaineCare, long-term costs could eventually top one-third or even half of the entire state budget.

As amended without a public hearing, LD 849 is not just irresponsible but also astoundingly unfair. It gives tax cuts of $21,638 to those making an average of $750,000 per year, and just $1 to the bottom 20 percent of income earners. Yet already, these lower-income households — seniors on fixed incomes, single parents working full time at minimum-wage jobs — pay the highest overall state and local tax rates.

While supporters say the bill uses only “surplus funds,” that claim is smoke and mirrors. In fact, the bill pays for only the first year of each new automatic rate cut. Yet the reduced rate continues — cutting future funding for schools, roads, bridges and the quality of life we value here in Maine. By drawing down our savings, it could also put the state’s credit rating in jeopardy.

This automatic “ratcheting effect” is the key feature of both TABORs past and TABOR present. It is like buying a car on a $100 scratch ticket with no plan or income to make more than the first monthly payment.

Even LD 849’s first and only payment on the tax cut comes at a huge cost. To pay, the bill would raid each end-of-year surplus normally used to insure against a rainy day to pay down the actuarial liabilities of the state pension system and keep the state’s credit rating strong.

Taxes are the commitment we make to one another, to a society that offers opportunities to all and shared human and physical infrastructure. They are our shared bond — our way to give back for systems of education, roads and public safety that help all of us survive and some of us prosper. Taxes are literally the income by which we pay our teachers, our plow drivers, our doctors and nurses, our police officers and firefighters. If we choose to cut that income in half, we should also be ready to say how we will reduce our spending.

Maine families and businesses don’t choose to cut their incomes in half without a plan to make ends meet. Nor do they buy what they cannot afford. Yet this is exactly the “buy now, pay later” mentality behind LD 849.

Sadly, LD 849 is just one example of the MO of this governor and Legislature.

As this Legislature nears its final adjournment, we are still trying to pay for the first $150 million worth of tax cuts in this budget. Most of these costs have simply been shifted to local taxpayers in the form of cuts to revenue sharing with towns. And two of every three dollars in tax cuts have gone to the wealthiest 20 percent of Mainers.

Next January, the unfunded costs of these giveaways will balloon to $400 million. Further kicking the can down the road, the governor’s newest tax proposal, related to pensions, will in just seven years mean a new unpaid bill of $210 million per biennium.

Rather than another partisan end-run around Maine voters, schools, the middle class and municipal officials, the Legislature should work together to fund K-12 education at 55 percent and Clean Elections — two measures Maine voters overwhelmingly approved.

Rep. Seth Berry of Bowdoinham is the lead House Democrat on the Legislature’s Taxation Committee.

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