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Inconvenient facts ignored in MECEP tax column

Posted Oct. 24, 2012, at 2:48 p.m.

In a coordinated attack, the professional left has struck again. This time the target is Maine’s new income-tax reductions.

The assault began on Oct. 16, when the Maine Center for Economic Policy held a State House news conference to release a report, “The Consequences of Maine’s Income Tax Cuts.” The next day, MECEP leaders Garrett Martin and Joel Johnson followed up with a column in the Bangor Daily News, “Income tax cut burdens many Mainers,” which summarized their “findings.”

A day later, David Farmer attacked with another BDN column – “LePage tax scheme a bad deal for Maine.” Farmer, who served as spokesman for former Gov. John Baldacci, wrote that the tax cuts “passed by [Gov.] LePage have overwhelmingly benefited people who make more than $323,000 per year.”

Farmer must have been away last year when the tax package was enacted as part of the state budget. The vast majority of Democrats in the House and Senate voted for it. This inconvenient fact was ignored by Farmer and MECEP, who decided to focus their fire on LePage, their favorite punching bag.

Maybe Farmer was away in 2009, as well, when the Democrats passed LD 1495, which dropped the top income tax rate from 8.5 percent to 6.5. The wealthiest Mainers stood to reap tax savings of more than $6,000 a year – more than twice as much as under the new law.

Meanwhile, LD 1495, signed by Baldacci, pounded low- and middle-income Mainers by expanding the sales tax to more than 100 vital goods and services, such as car repairs. Struggling Mainers trying to keep their old cars on the road even faced a tax on towing jobs when their cars finally died.

I do not recall an outcry from MECEP over that tax “reform,” which really was a gift to the highest-earning Mainers on the backs of the poor and middle class. Farmer was all for it. LD 1495 was the pride of the Democrats. But ordinary citizens so thoroughly despised it that it was thrown out by a people’s veto, with more than 60 percent of voters supporting repeal.

The gist of MECEP’s critique is that by cutting income taxes, the Legislature “shifted costs to local communities, forcing them to raise property taxes to avoid damaging cuts to education, road maintenance, fire and police protection and other basic services.”

This is where official statistics are useful. According to the Legislature’s nonpartisan Office of Fiscal and Program Review, the state provided revenue sharing funds of $190.6 million in the 2010-2011 budget, Baldacci’s last one. In the current biennium, under LePage, that figure rose to $190.7 million.

In the average municipal budget, 61 percent goes for K-12 education, according to the Maine Municipal Association (MMA). In this category, the state provided $897 million this year in so-called General Purpose Aid to Education. That was an increase of $44 million from the year before. And the year before, general purpose aid was up $18 million from the previous year.

The point is, the state expanded aid by $62 million in the first budget after the tax cuts were enacted.

The great myth is that when the state sends more money to cities and towns, property taxes stabilize or decline. During the property tax “revolt” of 2004, voters passed a referendum by MMA to dramatically increase school spending. Baldacci and the Legislature, obligated to act, jacked up general purpose aid from $732 million in 2005 to $823 million in 2006 and all the way to $945 million in 2008.

Property taxes didn’t budge. According to Michael Allen, director of Maine Revenue Services, “The only time they flattened in recent years was the first year of the ramp-up in education aid, [from 2005 to 2006], and even then property taxes did not go down, as promised by MMA. There is no guarantee how property tax commitments would change if the tax cuts had been diverted to additional aid to cities and towns.” History would suggest, he said, “that there would be no equivalent reduction in property taxes for resident homeowners.”

MECEP and Farmer are trying to score cheap political points by scaring Mainers about property taxes. They know that municipalities can take any additional money and spend it however they want to – on a new firetruck, an AstroTurf field for the soccer team or pay raises for town employees. The money could all be used – but not necessarily for property tax relief. Such decisions are made by local, voting residents.

MECEP assumes that if income tax cuts had not been enacted, a significant portion of the additional revenue would have gone to municipalities. But no one knows how the Legislature would have appropriated that money. It might have gone to pay down MaineCare’s hospital debt or for community colleges.

In any case, the tax cuts are a guaranteed reduction in the tax burden for Maine taxpayers. The people at MECEP should cease and desist from their baseless attacks.

State Rep. Kathy Chase, R-Wells, a former member of the Taxation Committee, now serves on the Appropriations and Financial Affairs Committee.

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