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  • Ramona du Houx: No more tax shifts

    Ramona du Houx
     
    Columns & Analysis | 
    Sunday, February 1, 2015

    Cutting taxes, most everyone would agree, could be a great idea. But how do you go about it without placing more of burden on the middle class?

    Not with Gov. Paul 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 schoolteacher 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 see 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. But then he plans to stop sending funding to municipalities for essential services. This cost-shifting will end up, as it has been, in property tax increases.

    When LePage was Waterville’s mayor, he ranted against any mention of cutting revenue sharing. Oh, the costs that shifting circumstances have on some politicians.

    What will hurt people daily 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. People will have to pay sales tax to have their hair done, go to a concert or visit a museum. Just to get the snow removed, hire an accountant or lawyer, or get a tow to the mechanic will cost people that sales tax increase.

    That tax plan is backward.

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

    But 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.

    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.

    From the report: “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.”

    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, all while getting bond initiatives passed that would go on to help research and development — the type of research that led to the University of Maine’s breakthroughs in bio-fuels and composite technologies.

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

    The funds were rewarded on a competitive basis. The recipients of the fund’s grants secured more than $80 million in matching funds. A 2011 evaluation of Maine’s research and development investments found that those 29 projects, that were granted funding by mid-2011, had directly created 289.5 jobs and preserved 303 in traditionally higher-paying sectors. Nineteen of those projects led to the creation of a new product or service.

    It is interesting to note that the MTAF hasn’t received any new funding since 2010.

    Maine's community colleges also received bond funding for their expansions, which has enabled thousands to get good-paying jobs

    Cutting taxes for the top 2 percent has not yielded jobs for Maine, or the nation. Meanwhile, America has experienced job growth for more than four years with Obama’s policies.

    Maine has been held back because of the trickle-down economic mantra LePage follows.

    Ramona du Houx is a published author and has written about Maine politics for 10 years. She is co-owner of Polar Bear & Company publishing and owns the news magazine Maine Insights. She lives in Solon.