Maine can’t tax its way out of fiscal problems

By Michael Thibodeau, Special to the BDN
Posted Feb. 13, 2013, at 2:19 p.m.

Benjamin Franklin told us there are only two certainties in life: death and taxes. As I begin my second term in the Maine Senate, I find myself asking why Democrats always seem drawn to the latter, often more frightening, certainty.

Our state government once again is facing severe budget shortfalls, and Democrats — who campaigned on the pledge of making the “wealthy” pay their “fair share” — once again are suggesting higher taxes are the solution to our economic woes.

I believe the evidence suggests we should be doing the exact opposite.

Over the past few weeks, we’ve heard a lot about which government agencies and programs will suffer because of budget cuts.

What we haven’t heard much about is the toll the recession and anemic economic recovery have taken on Maine’s private sector. According to the state’s Office of Policy and Management, Maine’s state domestic product is projected to be approximately $2 billion less over the next five years when compared with the last period of healthy post-recession growth.

In the coming months, as we in state government try to find ways to fund government services, we need to be mindful of the untold story of Maine businesses that are struggling against incredible odds to meet their own payrolls and stay in business. Asking them to contribute a larger percentage of their income will have a direct impact on their ability to invest, expand and hire additional employees.

For the third year running, Maine is No. 50 -– dead last -– in Forbes Magazine’s annual business rankings.

“Maine’s problems run deep,” Forbes stated in its summary on our state.

One of the main factors in the Forbes ranking: corporate income tax rates that are the second highest in the nation.

In the previous legislative session, under Republican leadership, Maine finally took a big step forward by passing the largest income tax cut in state history. A frequent Democrat talking point is that these were “tax cuts for the rich,” but the evidence would suggest otherwise. The richest 10 percent of Mainers, who earn more than $119,000 annually, will see their share of total income taxes collected actually increase from 55 percent to 57 percent.

Meanwhile, the 80 percent of taxpayers in the low and moderate income levels, who pay only 24 percent of all state income taxes, will receive 33 percent of the cuts. Roughly 70,000 low-income Mainers who earn $25,000 or less annually will end up paying no state income tax at all. These tax reductions were a necessary, measured approach designed to encourage investment in our state.

We need to lower the tax burden, not only for individuals, but for our businesses. A recent U.S. Census report indicated that the nation’s fastest growing states, such as Florida, North Dakota and Texas, are the ones with the lowest tax rates. The state of Utah taxes all of its corporations at a flat rate of 5 percent. Utah is on the opposite end of the Forbes spectrum, having been ranked as the best state in the nation to do business for the third straight year.

It is time for Maine to start looking at what successful states are doing right and then take an honest look in the mirror.

Forbes also cites Maine’s high energy costs, which are 27 percent higher than the national average, as a weakness. Gov. Paul LePage wants to expand natural gas availability throughout the state, a move that would reduce energy costs for Maine companies and allow them to expand. I think the Legislature needs to get behind him on this. We also need to capitalize on the emerging compressed natural gas industry, which also would give businesses cheaper alternatives.

At the same time, we need to look at what Maine is doing right. I mentioned the tax cuts, but the previous Legislature, under Republican control, took other extraordinary steps to improve Maine’s business climate. We removed dozens of needless regulatory obstacles businesses face, introduced more competition into Maine’s health care industry, made the state pension system solvent and took tough but necessary steps to control spending within our MaineCare budget.

In the coming months, as we look to balance the books, we in the Legislature have to make sure we don’t take the state backwards by putting a bigger burden on those who are funding state government.

Sen. Michael Thibodeau, R-Winterport, is the Maine Senate Republican leader.

http://bangordailynews.com/2013/02/13/opinion/maine-cant-tax-its-way-out-of-fiscal-problems/ printed on November 28, 2014