Gov. Paul LePage explains his biennial budget proposal to reporters on Friday, January 9, 2015, at the State House in Augusta.

LePage’s tax reform plan is a game-changer — that’s why no one is talking about it

AUGUSTA | Despite its far-reaching implications, lawmakers’ reactions to Gov. Paul LePage’s ambitious tax reform package continue to remain mute. As part of his two-year, $6.3 billion budget, LePage is proposing a reduction in the state’s individual and corporate income taxes and the elimination of the estate tax. At …

Published Jan. 13, 2015, at 6:18 p.m.     |    

LePage’s tax reform plan is a game-changer — that’s why no one is talking about it

Posted Jan. 13, 2015, at 6:18 p.m.
Last modified Jan. 14, 2015, at 7:36 a.m.

AUGUSTA, Maine — Despite its far-reaching implications, lawmakers’ reactions to Gov. Paul LePage’s ambitious tax reform package continue to remain mute.

As part of his two-year, $6.3 billion budget, LePage is proposing a reduction in the state’s individual and corporate income taxes and the elimination of the estate tax. At the same time, the plan would broaden and increase the state’s sales tax. The plan also eliminates the ability for Mainers to itemize deductions and eliminates other tax credits, including the mortgage interest tax exemption, the state’s earned income tax credit and others, while expanding other money-saving programs for older Maine residents.

While it’s by no means the only potentially controversial element in the governor’s budget — hello, (or should that be goodbye?) revenue sharing — the tax reform plan is clearly LePage’s signature budget priority. He describes it as a way to move the state from an income-based tax system to a “pay as you go” consumption-based system.

It’s not the first time lawmakers have been asked to consider an income tax reduction coupled with an expansion of the sales tax. LePage’s plan is not dissimilar to several that have been proposed in the recent past. One even was passed into law in 2009, though it was overturned by a people’s veto.

Still, legislators so far have been hesitant to share even preliminary opinions about the plan, instead offering easy-to-agree-upon statements about ensuring LePage’s tax reform plan is good for everyone.

Here are a few possible reasons why those responsible for dissecting the governor’s budget are staying so quiet about Maine’s latest tax reform plan.

It’s complicated. Lots and lots of moving pieces. While the core idea of LePage’s tax plan has been discussed before, it has never been presented as one part of a total budget package designed to save Mainers $300 million annually — that’s the savings LePage says would be created by 2019, when the plan is fully implemented.

That’s because it’s not just the sales and individual income taxes. The budget also includes the changes listed above, plus the elimination of revenue sharing, a new provision to allow municipalities to tax large nonprofits, a transfer of telecom excise tax revenue from the state to local governments, expansion of the Property Tax Fairness Credit and more.

That’s leaving many lawmakers scratching their heads, awaiting more complete modeling that will provide a picture of what the tax reform plan — in its totality — will mean for Mainers.

It’s the “net effect” Democrats are looking for, House Speaker Mark Eves, D-North Berwick, said Tuesday. “We need more information,” he said.

Matt Gagnon, a former GOP strategist and current executive director of Maine Heritage Policy Center, a free-market think tank that in the past opposed broadening the sales tax base, said lawmakers aren’t just dodging the question when they say they haven’t yet formed opinions about the proposal.

“A lot of people are just trying to digest it all. I’ve gotten through 560 pages right now and still haven’t wrapped my head around it,” Gagnon said. “You’re going to see a very deliberative process.”

It’s politically sensitive, especially for Republicans. Many members of the GOP fought tooth and nail against previous proposals to link sales tax expansion with income tax reduction. Most notably, Senate President Mike Thibodeau, R-Winterport, won his first Senate race in 2010 with a campaign vehemently opposing Democrats’ approval of such a plan a year earlier.

Knowing the issue is sure to generate controversy, lawmakers likely are taking their time before coming out with a strong position. There are a lot of political angles to consider.

Even for those who haven’t had to vote or campaign on such a tax deal before, the issue is thorny. Segments of the Republican Party’s base are opposed to increased taxation as a matter of course. So when their party’s standard bearer not only proposes an expansion but an increase of the sales tax, it’s a hard sell. That makes it hard for some GOP lawmakers to give the plan their full-throated support.

But it’s not just Republicans who will need to deal with the politically volatile nature of this proposal. Voters skeptical to new taxes — and lobbyists paid by the industries those new taxes might affect — make their opposition known to both parties.

Last year, a special committee charged with examining the state’s tax expenditures — such as the ones exempting many services and goods from the sales tax — briefly flirted with enacting an “amusement tax” on things such as golf fees and movie tickets. The committee’s Democratic leaders quickly shelved the proposal, citing the political difficulty of enacting such a plan.

“Politically, it’s a very difficult thing,” said House Majority Whip Sara Gideon, D-Freeport, a member of the “Gang of 11” lawmakers who crafted a tax reform plan in the last session, only to see it killed in committee. “It ends up playing out differently in the public than it does with lawmakers sitting around a table discussing policy.”

Lawmakers are curious what the public thinks. While the budget has been the talk of Augusta for several weeks, people outside the dome may not yet be thinking about it.

House Republican Whip Ellie Espling of New Gloucester said Tuesday she hasn’t heard a peep from constituents about the budget, but said she and her colleagues were eager to get back to their districts to gauge public opinion.

Senate Democratic Leader Justin Alfond of Portland said it’s up to the governor to make his pitch to Maine people. “This is his budget to sell,” he said. They want to know “how it makes Main Street stronger, how it helps the middle class.”

For his part, LePage said lawmakers haven’t given him any indication of how they feel about the budget. But, he said, if they’re interested in remaining in politics, they’ll pass it.

“This budget is designed for the 2016 election, and that’s clear. If you haven’t figured that out, I’ll tell you,” LePage said during an interview Tuesday.

“Maine people want change,” he continued. “I think the people in Maine are very, very clear that they accepted my message, and if this Legislature doesn’t follow the message the people gave us, I think 2016 will take care of the problem.”

Follow Mario Moretto on Twitter at @ riocarmine.

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