Maine’s business tax climate ranking, which sat in the bottom tier nationally 10 years ago, has improved to 28th in the nation, according to the Tax Foundation’s annual analysis.
The conservative Washington, D.C.-based think tank’s 2018 State Business Tax Climate Index, which was released on Tuesday, is based on states’ tax code structure and the distribution of overall tax burden. The foundation gave Maine relatively high marks for its individual and sales taxes but was not impressed with the state’s corporate, property and unemployment insurance tax rates.
The foundation noted that a 3 percent surtax on income over $200,000 to fund education, which was approved by Maine voters last year but overturned by the Legislature, would have cratered Maine’s rankings to 35th in the country.
States that do not charge residents and businesses one of the major taxes — such as sales, corporate or individual income taxes — typically fare well in the Tax Foundation’s rankings but the authors said states with low rates spread across broad bases also perform well.
In general, Maine’s ranking has improved since 2006, when it ranked 43rd overall. By 2010, when Republican Gov. Paul LePage was elected, Maine ranked 34th and improved to 29th four years later. A sales tax increase from 5 percent to 5.5 percent in 2014 dipped the state’s rank to 33rd but it rebounded to 30th last year.
LePage and fiscal conservatives have frequently touted the Tax Foundation’s rankings when advocating for cutting or reforming taxes. LePage has tried for years to reform the tax code by reducing the income tax — which he has done for the top rate, from 8.5 percent in 2011 to 7.15 percent now — and expanding the goods and services that are subject to the sales tax. However, Maine’s sales tax code has ranked well over the years: 10th in 2012 and 8th in the nation for the past three years
LePage’s opponents have barraged him with attacks over the years for skewing the bulk of the tax cuts — at least in terms of their net decrease of state state revenues — toward wealthy Mainers. They have also faulted LePage for policies that have shifted tax burden to local property taxes, such as austere state education funding proposals and reducing tax revenue sharing with municipalities.
On property taxes, Maine has sunk in the foundation’s rankings from a dismal 38th in 2012 to an even worse 41st now.