Americans are taxed less than their counterparts in other wealthy, long-standing democracies, but they complain more about taxes than citizens in these other societies. In part, this may occur because there are relatively few highly visible benefits of taxation for the middle class.
For instance, Samantha Bell supported the anti-government views of her father, Joseph Andrew Stack, who flew a small plane into the Internal Revenue Services building in Austin, Texas, in 2010, killing himself and an IRS employee, injuring others and causing considerable damage. However, when she found herself unemployed and pregnant, she moved to Norway and commended its public policies assuring access to medical care for those who need it.
While the process has been messy, as politics generally is, over the last decade four broad goals have driven tax reform in Maine: fostering economic growth by shifting the tax burden from income and property to consumption, reducing the volatility of public revenues, “exporting” the tax burden and reducing or stabilizing overall tax burden.
The first three of these goals have been broadly — though not universally — accepted in principle; the fourth remains highly contentious. Collectively, a 2003 referendum where Maine residents voted for state government to pay 55 percent of education costs; property tax reform of 2005; and legislation to lower income taxes and increase sales taxes, passed by the Legislature but rejected by voters in 2010, provided or would have represented considerable progress toward realizing these goals.
The school funding referendum in 2003 shifted a portion of school expenditures to the state to augment the resources of municipalities. The state is not on track, however, to meet its funding target.
The property tax reform drew in particular on an expanded “circuit breaker” program as a targeted means of easing the problems especially of low-income and high-home-valuation households.
The voter-rejected 2009 reform had multiple aspects. One would have shifted taxes away from income. It reduced the highest marginal tax rate a bit and used a progressive “household credit” to raise the income level at which the highest rate kicked in, thus lowering effective income tax rates for the vast majority of Mainers. In combination with shifting taxes away from property, it reduced some impediments to economic growth.
Additionally, the 2009 reform would have added taxes to consumption, and, by expanding the state sales tax to a broader range of services and raising excise taxes, it made Maine’s public revenues less volatile. Further, it raised sale tax rates on selected services “consumed” disproportionately by non-residents, thus “exporting” a larger portion of Maine’s public revenues.
This year’s “Gang of 11” proposal in the Maine Legislature was similar to, but more comprehensive than, the 2009 plan, particularly in broadening the scope of the sales tax.
Early in the current century the Tax Foundation saddled Maine with a No. 1 ranking on total tax burden, creating strong conservative pressures to reduce this burden. By 2008, the foundation had adopted a new, more accurate methodology, which placed Maine 18th in tax burden or among the middle third of the states.
Reaching this level had been an explicit target of the 2005 property tax reform. So, the enthusiasm for reducing the proportions of Maine’s total personal income that public revenues consume was in part the result of views resting on a faulty methodology.
The narrowness of the current sales tax unfortunately represents only a portion of Maine’s current “tax expenditures.” These are items that are taxed for some Mainers but not for others. Indeed, Maine’s tax expenditures exceed its tax revenues. If tax expenditures can be gradually drawn down, tax rates for the population can be reduced considerably, and these reductions could be made in ways fostering perceptions of greater tax fairness.
These results could be achieved even if total state revenue were allowed to increase somewhat more rapidly than annual increases in population, price and productivity changes.
Attaining this outcome would represent a stellar achievement because, as Samantha Bell suggests, it would surely be a mistake to reduce taxes to a point at which the state’s tattered network of social supports was even less able to meet the constitutional goal to “promote the general welfare” of citizens. Most of those citizens find themselves at the mercy of ruinous forces beyond their control at some point in their lives, particularly in childhood and old age.
Charles Lockhart of York is professor of political science at TCU in Fort Worth, Texas, where his research focuses on comparing and explaining differences among the social policies of advanced industrial societies as well as the American states. He is a member of the Maine Regional Network, part of the Scholars Strategy Network, which brings together scholars across the country to address public challenges and their policy implications. Members’ columns appear in the BDN every other week.