December 16, 2017
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Maine should fear being labeled a high tax state. Just look at Connecticut.

By Dana Connors, Special to the BDN
Updated:
http://401kcalculator.org | BDN
http://401kcalculator.org | BDN

“We fear … Maine again being labeled as among the most taxed states in the nation.” Those aren’t the words of the Maine State Chamber of Commerce, though they could be. No, that quote is from a BDN editorial last November opposing passage of Question 2, the 3 percent surtax on annual income over $200,000 to provide more funding for education.

But this isn’t just about individuals; this surtax falls the hardest onto the backs of Maine small businesses. That’s why more than 30 statewide business associations and dozens of small businesses continue to advocate for its repeal this session, and it is why the Legislature must act now to find a different way to fund public education.

Yes, times are different in Augusta this session as biennial budget negotiations have broken down. It is true that closing the budget has come down to not which programs are going to be cut to balance the budget, but how to get rid of the 3 percent surtax. We take strong issue with the BDN’s notion that eliminating the surtax is simply a tax cut for the wealthy. This surtax is mainly being paid for by businesses. Nothing has really changed in that respect since last November.

So this paper clearly saw then the negative fallout from Maine’s position among the most taxed state, but repealing the surtax now should be regarded as a tax cut to be pocketed by the “wealthy”?

Every dollar Maine collects from the 3 percent surtax is a dollar that isn’t available for our economic growth. The fact is, in the business world, plans for investment, job creation, expansion and opportunities for our people are made here and “away” every single day. And there are consequences when states enact tax policies that encourage businesses and investors to take their money elsewhere.

Connecticut increased its income tax rate on high income earners (over $1 million a year) in 2015 to 6.99 percent, and the results are astounding: income tax revenue is down $450 million this year, and is expected to fall $600 million short next year; significant cuts have been made to Connecticut schools and state government; and it has lost 3 percent of its population, many of whom are younger workers and retirees abandoning the state in droves.

Maine is the oldest state in the country, so our demographics don’t allow us to lose any population. Some claim people don’t make decisions on where they live based on taxes — and some don’t — but in Connecticut, those in a position to move have.

If the Maine Legislature does not act this session on lowering the 10.15 percent top tax rate — which is 3.6 percentage points higher than Connecticut’s — what will our economy will look like in five years? Who will be left? Don’t believe me, take a trip to Naples, Florida, and see the many new Florida residents from Maine — former CEOs and state leaders — who call Florida home instead of Maine. It is not that they dislike Maine (the winters probably don’t help), but they would be crazy not to, based on the amount of money they save simply by staying six months and one day to avoid paying the Maine income tax. If we continue down this path, the number will grow exponentially.

Yes, it is true this year’s budget debate isn’t about cutting programs. Our revenues are in fact up, but that’s not because of the 3 percent surtax — it’s because our economy is beginning to show signs of life. But unless legislators act to rid us of the onerous moniker of “the highest income tax in the country,” future growth is in trouble. And just maybe the next budget discussions will be back to the bad old days — shortfalls, cuts and reductions.

I seriously doubt that’s what this paper wants. It’s not what we want. And it is every reason we hope the Legislature will find the wisdom to repeal the 3 percent surtax, and find a better way.

Dana Connors is president of the Maine State Chamber of Commerce.

 


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