< Back to all posts
  • Invest in job creation, not LePage's cost-shift tax policy

    Editorial by Ramona du Houx

    Cutting taxes, most everyone would agree, could be a great idea. But how do you go about it without placing more burden on the middle class? Not with LePage’s plan. While LePage is trying to tackle the issue, his plan is focused on benefiting the top 2 percent. With his proposal, those earning $50,000 to $175,000 will be taxed at the highest tax rate. And those earning about $10,000 to $50,000 would pay — the same tax rate — as the top 2 percent. So a school teacher earning $26,000 will pay the same rate as a successful investment banker who would get a 2.2 percentage-point cut to his tax rate. With the elimination of the estate tax, the top 2 percent will receive a boon. LePage already cut the tax rate for the wealthiest — this is the second round — and again the middle class will carry the burden.

    And he plans to stop sending any funding to municipalities for essential services. This cost-shifting will end up, as it has been, in property tax increases. When LePage was mayor of Waterville, he ranted against any mention of cutting back the funds to cities from the state. Oh, the costs that shifting circumstances have on some politicians!

    What will hurt people on a day-to-day basis is the sales tax increase to 6.5 percent. While I love going to the movies, I do not relish paying an expanded sales tax for my ticket. To have your hair done, go to a concert or visit a museum, you’ll have to pay sales tax. Just to get the snow removed, hire an accountant or lawyer or get a tow to the mechanic will cost you that sales-tax increase.

    This tax plan is backwards. While it appears to expand tax relief for the less fortunate, those same people will have to pay for the increased sales tax, and if they own a home or business — very significantly increased property taxes, and many of their benefits will also be slashed with health-program cuts.

    Back in 2009, Governor John Baldacci and Democratic lawmakers came up with a similar plan. The big difference was that the plan did not stop revenue-sharing to cities. It did not increase property taxes, and it did not cut back on essential services. Yet, it cut taxes for all tax-paying citizens, eliminating them for the less fortunate.

    But because it raised the sales tax, Republicans went to work and flooded the airwaves with ads declaring certain services would skyrocket. So, real tax relief for all never happened, as the right-wing ad factory led the public to believe they would be paying a lot more because of sales taxes. The opposite was true.

    A recent analysis by the Institute on Taxation and Economic Policy evaluated the local tax burden in every state. According to the study, in 2015 the poorest fifth of Americans will pay on average 10.9 percent of their income in state and local taxes; the middle fifth will pay 9.4 percent, and the top 1 percent will average 5.4 percent.

    “States and localities have regressive systems because they tend to rely more on sales and excise taxes, which are the same rate for rich and poor alike. Even property taxes, which account for much of local tax revenue, hit working- and middle-class families harder than the wealthy because their homes often represent their largest asset,” reads the report.

    This ideological battle is being waged across the nation and involves the right wing promoting the economics of austerity over investing in people and programs in innovation that can grow the economy.

    Baldacci had it right. He consolidated administrations from school districts to branches of state government. He got the prison system to work together, and stopped agencies from duplicating work, while getting bond initiatives passed that would go on to help research and development (R&D) — the type of research that led to the University of Maine’s breakthroughs in bio-fuels and composite technologies. The VolturnUS offshore floating wind turbine is the first of it’s kind in the Americas, and so is The Ocean Renewable Power Company’s tidal power generator. Both were developed at UMaine laboratories; both received state bond funding to jumpstart them. And federal grants happened directly afterwards.

    Maine’s innovative technologies began to really take off after 2007, with voter-approved bonds. The  $50 million investment became know as the Maine Technology Asset Fund and nourished growing sectors of high-wage jobs.

    The funds were rewarded on a competitive basis to university labs, businesses, and nonprofit groups with plans approved by the American Association for the Advancement of Science. The recipients of the fund’s grants secured more than $80 million in matching funds. A 2011 evaluation of Maine’s R&D investments found that these 29 projects, which were granted funding by mid-2011, had directly created 289.5 jobs and preserved 303 jobs in traditionally higher-paying sectors. Nineteen of those projects had led to the creation of a new product or service.

    But the Maine Technology Asset Fund hasn’t received a new infusion of funds since 2010. A legislative committee formed in 2006 outlined an R&D strategy for the state and recommended a $50 million annual bond investment in the Maine Technology Institute.

     Community Colleges received bond funding for their expansions, which has enabled thousands to get good-paying jobs. Gov. Baldacci put in new job-training initiatives, which have worked, but as the workplace changes and new tech jobs emerge, more needs to be done.

    Cutting taxes for the top 2 percent has not yielded jobs for Maine or the nation. This sector of society already has been given many chances to prove their "trickle-down" economics. America has experienced job growth for over four years with President Barack Obama’s policies. Maine has been held back because of the trickle-down mantra LePage follows.

    At a recent press conference, Democrats said they have proposed bills for job training, workforce development, college affordability, and job creation. No doubt they will include R&D bonds in this mix.

    All lawmakers should remember we had significant job growth before the Great Recession, and that was largely due to Baldacci’s policies. The state is in need of a real R&D bond package. And interest rates are historically low with the Fed at the zero-lower bound. The ongoing ripple effect in the economy from bond investments has been proven to create new companies with new jobs.