LEWISTON, Maine — For the second year in a row, Maine has been ranked second-worst, after Hawaii, in the country for making a living, according to the finance website MoneyRates.com.
Maine also ranked eighth among the 10 worst states in which to retire, according to MoneyRates.
The rankings, combined with a Gallup poll released in August that suggested Mainers were more pessimistic than other Americans about their standard of living improving, seem to paint a dire picture for the state’s future.
But Richard Barrington, the senior financial adviser at MoneyRates who compiled the list, said Mainers and New Englanders, in general, tend to enjoy a higher quality of life in cleaner environments and safer communities.
A below-average income, high cost of living and one of the highest tax rates in the nation combined to put Maine near the bottom, according to Barrington’s analysis. Hawaii’s high cost of living and high tax rate erode its near-average income level to make it the worst state in the country to earn a living, he said.
But even if Maine reduced its tax rate to zero, it still would be among the worst 10 states for making a living, Barrington said.
“Taxes are often a focal point for controversy and criticism,” Barrington said in a telephone interview Wednesday. “But I wouldn’t say that’s the defining issue that Maine has.”
To test that theory, Barrington said he did an experiment and lowered Maine’s state tax rate to 5.5 percent, the average state tax rate for the U.S., he said that change only moved Maine down one spot in the rankings. He said reducing the tax rate to nothing made Maine the eighth-worst state in which to make a living.
He said lower incomes, higher cost of living and an unemployment rate that seems to be creeping up again are bigger problems.
“Obviously, there are other things going on,” Barrington said.
He said an effort to promote the state regionally for its quality of life and relatively low energy and labor costs might be a better way to improve the economy than a strategy that aims only to lower taxes. He noted that business taxes and a more business-friendly regulatory environment were important factors that could help improve Maine’s economy.
MoneyRates uses a formula that includes taxes and cost of living to come up with an adjusted average income. Under the formula, Maine’s cost of living is about 13 percent higher than the national average, while its average income is well below the national average.
Barrington said the idea behind the list is “not to shame the states where times are tough. Instead, the inspiration for this analysis grew out of the observation that as difficult as the economy has been in recent years, there are significant differences in conditions among the 50 states.”
Maine’s ranking among the 10 worst states in which to retire is a financial point that has not gone overlooked by Republican Gov. Paul LePage.
LePage in 2011 proposed legislation that would eliminate state income tax on pensions and other types of retirement income. This year, the Legislature enacted some changes to the tax code, including expanding the amount of retirement income that is exempt from state income taxes from the first $6,000 to the first $10,000.
In May, LePage received some positive news in Chief Executives’ eighth annual survey of CEO opinion of the best and worst states in which to do business. That survey said Maine ranked 32nd, compared with 36th the year before.
LePage heralded the news in a release. “… we have started to put Maine back on the road to prosperity. However, more work needs to be done if we want to continue job growth and increase overall income, bringing Maine more in line with the national average.”
The LePage administration also has focused on regulatory reform and has reduced business tax rates. The governor most recently said the state must be more competitive when it comes to the price of electricity, noting that while in-state rates are relatively low on a regional basis, they remain among the most expensive in the nation.
Barrington warned that the MoneyRates survey should be kept in perspective. Barring any major, unforeseeable changes in either cost of living or income, Maine is likely to remain on the list of the worst places to make a living, he said.
Some of that is simply Maine being a state that’s part of the nation’s “geographical extremities,” he said. “But it’s important to remember this survey is focused on the best and worst states to make a living and not necessarily the best and worst states to live in.”
Vermont, Mississippi, Montana, Rhode Island, California, West Virginia, South Carolina and South Dakota also made the list of worst states in which to make a living.
Virginia, Washington, Texas, Illinois, Colorado, Michigan, Wyoming, Utah, Delaware and Massachusetts were the top 10.