Currently showing posts tagged Maine Taxes

  • Tax-rebate scam costs taxpayers millions for Mainers

    Three-card Monte, Nigerian princes, New Markets Tax Credits — what do they have in common? They promise big returns if you will just put your money up front. But you wind up a lot poorer and, hopefully, a bit wiser from the experience.

    Some out-of-state companies have bilked Maine taxpayers out of millions of dollars — $35.5 million to be exact — with a 21st Century financial con job that promised new hope for shuttered or faltering Maine mills and the men and women with jobs hanging in the balance, but grabbed the money and hit the road.

    The story gets worse: Because some Republicans in the Maine Legislature recently rejected legislation that would have held these companies accountable and prevented further abuses in a state tax-credit program, Maine taxpayers will remain on the financial hook for millions in taxpayer dollars annually to the very same companies that orchestrated complex financial schemes completed in a single day without making any mill upgrades at all.

    The Maine Legislature created the New Markets Capital Investment Program in 2011 to encourage new capital investments in aging mills in economically distressed parts of Maine. The problem is, instead of upgrading old mills to keep them running and Maine people working, companies have claimed $35.5 million in tax rebates for “investments” that were never actually made in Maine mills.

    Instead, these companies used financial maneuvers that the IRS calls “sham transactions” to con Maine taxpayers out of millions. Those abuses were documented in a two-part series in April by Maine Sunday Telegram reporter Whit Richardson.

    I often wonder, when I see the old Wausau Mill here in Chisholm that closed in late 2008 and early 2009 leaving more than 200 Mainers out of work, how many paper makers might still be working there if we had a program back then that actually invested in Maine mills and their workforces.

    How many Maine mill owners might have been able to upgrade their facilities with the $35.5 million we were cheated out of through the New Markets program? How many employers in western Maine and other economically distressed regions might have been able to keep mills operating? How many Maine employers, workers would still have jobs to support their families?

    Many workers in my legislative district (Jay, Livermore and Livermore Falls) must now commute to jobs in Lewiston, Augusta, Bath/Brunswick and Portland.

    Through my work as a job service manager for the Maine Department of Labor from 1984 to 2003, we talked regularly with workers and unemployed workers in those communities.

    We helped workers find jobs and get back on their feet after layoffs or mill closures. We also helped unemployed workers, who qualified and chose retraining/education to find a new career or to relocate if they found qualifying work elsewhere.

    While Maine taxpayers are footing the bill for the millions of dollars companies received that benefited from the New Markets tax scam, thousands of Maine workers have lost the ability to work in their own communities.

    Although I retired from the Department of Labor in 2003, my work instilled in me a sense of urgency to make sure the state’s economic-development programs work for Maine people.

    Legislators owe it to all Maine taxpayers to ensure those tax-credit programs accomplish their intended purposes, to fix them if they don’t, and to hold accountable those who benefit by gaming the system.

    That is why I voted with the majority on the Legislature’s Labor, Commerce, Research and Education Committee to stop further abuse of the $50 million remaining in the New Markets program and to reject a request from the Finance Authority of Maine for an additional $250 million for the program.

    The majority also developed legislation to prevent future payoffs for bogus investments and sham transactions. The Maine House approved this legislation, but Republicans in the Maine Senate killed it. They should be held accountable for millions in taxpayer dollars lost on a scheme worthy of Charles Ponzi or Bernie Madoff. Legislators should invest in Maine businesses and Maine workers, not out-of-state scam artists.

    Rep. Paul Gilbert, D-Jay, is a fourth-term member of the Maine House of the Representatives and serves on the Labor, Commerce, Research and Economic Development Committee.

  • Taxation Committee rejects Gov. LePage's unpaid-for proposal to eliminate income tax

    Measure would give huge breaks to the top 1 percent, while gutting education and raising property taxes

    By Ramona du Houx

     The Legislature’s Taxation Committee on Wednesday rejected a proposed Constitutional amendment from Governor Paul LePage to abolish the state’s income tax.

    Independent Rep. Gary Sukeforth of Appleton joined Democrats on the committee in opposing the $1.7 billion unpaid-for proposal.

    “Maine families balance their budgets every day and if they want something, they have to pay for it. Governor LePage and his Republican allies have not said where this $1.7 billion is going to come from,” said House Taxation Committee Chair Adam Goode, D-Bangor. “Voters are not getting the full story. It's reckless. Cutting every cent of K-12 funding would not cover the entire cost of eliminating the income tax. States that have tried this failed experiment have been forced to close schools early.”

    The income tax elimination would force cuts in K-12 and higher education, with the majority of the tax break going to those with incomes greater than $392,000.

    Maine spends close to $1.2 billion on K-12 and higher education and $750 million on health care for children, seniors, and people with disabilities.   Even if the governor cut all state funding for education and half the funding for health care, there still wouldn’t be enough money to cover the cost of eliminating Maine’s income tax.

    In WisconsinKansas, and Louisiana, unpaid for tax cuts for the wealthy have hurt the economy and led to crippling cuts to schools. 

    “The governor’s proposal to eliminate the income tax is more of a political sound bite than a credible proposal. As someone who has worked on bipartisan tax reform for as long as I’ve been in the Legislature, I can say with certainty, that no serious plan would include a gaping hole in our budget,” said Democratic State Senator Nate Libby of Lewiston, who serves on the state’s Taxation Committee. “His proposal would force irresponsible cuts to education and hurt our towns at a magnitude that even he can’t explain how it will be paid for.”

    "We applaud the committee's rejection of this reckless gimmick that would have put funding for schools and other vital services at risk. Repeal of the income tax would create a $1.7 billion hole in future budgets. We could eliminate all state funding for K-12 and higher education and still not realize the savings needed to pay for this fiscally irresponsible proposal. We would have to increase local property taxes by 40 percent to maintain current spending for schools," said the Maine Center for Economic Policy (MECEP) Executive Director Garrett Martin. 

    "Doubling the current sales tax rate still would not generate the revenue needed to balance the state's budget. It's time for legislators to get back to work on a bi-partisan budget that incorporates some of the best ideas from legislative Democrats' A Better Deal for Maine plan and the governor's original budget proposal. We urge them to deliver a budget that includes both responsible, fair tax reforms that benefit middle- and low-income families and raises the revenue we need to fund education, health care, and other investments that will improve our economy and create opportunity for all Maine people."

    The measure will now head to the House and Senate for a vote, where it will need support from two-thirds of the members in order to pass.

    Five reasons why eliminating Maine's income tax is "a bad idea":

    1. It's a huge giveaway to the wealthy. The top 1 percent of Mainers - 7,000 households with incomes greater than $392,000 - will get a $61,000 income tax cut on average  and account for 26 percent of the total amount. Meanwhile, middle-income Mainers - 140,000 households with incomes between $38,000 and $60,000 - will on average get a $900 income tax cut and account for less than 8 percent of the total. Of course, the $900 income tax cut for middle-income Mainers will quickly disappear in the face of property and sales tax increases required to pay for eliminating Maine's income tax. Instead of giving huge tax breaks to the wealthy and large corporations, which eliminating Maine's income tax will do, we should focus on fiscally responsible policies that deliver more value to the middle class.

    2. It jeopardizes funding for schools and other vital servicesIn 2019, the current income tax is expected to generate more than $1.7 billion in revenue. That's money we will use to pay for schools, provide access to health care for seniors and people with disabilities, maintain public safety and critical infrastructure, and deliver other important services. Maine spends close to $1.2 billion on K-12 and higher education and $750 million on health care for children, seniors, and people with disabilities. Even if the governor cut all state funding for education and half the funding for health care, he still wouldn't have enough money to cover the cost of eliminating Maine's income tax. Rather than cut support for schools and other services, we should be calling on the wealthy and corporations to pay their fair share.

    3. It will trigger property tax increases. Reduced funding at the state level for schools and local services merely shifts costs to property taxpayers. This has already begun to happen. For low- and middle-income Mainers, increasing property taxes is a much greater concern than what they pay in income taxes. In addition, relying more on property taxes to fund schools and local services is a recipe for increasing inequality between wealthier and poorer parts of the state.

    4. It will make an unfair tax system even less fairLow- and middle-income Mainers already pay more in state and local taxes per dollar earned than wealthy Mainers. Eliminating the income tax will worsen the situation, particularly as other taxes go up to make up for lost income tax revenue. In fact, states with the least fair tax systems in the country are those that don't have an income tax.

    5. It's a failed prescription for growing Maine's economy. Real-world results and the academic literature lend little support for personal income tax cuts as a strategy for boosting Maine's economy. Since Maine must balance its budget, the legislature must pay for tax cuts by cutting state services or raising other taxes. These actions will offset any benefits of the income tax cut and, even worse, may compromise Maine's future prospects for growth. We can't grow a strong economy when schools and workforce development programs are underfunded, vital communications and transportation infrastructure is absent or decaying, and lack of funding consistently undermines long-term efforts to improve health and protect the environment.
    In a follow-up blog post on May 6, 3 Unsavory Ways to Pay for Eliminating Maine's Income Tax," Martin outlined the options left for legislators to fund government services without the income tax:
    1. Eliminate all state funding for K-12 education and higher education and half of state funding on health care for children, seniors, and people with disabilities. In FY2014, Maine spent close to  $1.2 billion on K-12 and higher education and $750 million on health care for children, seniors, and people with disabilities. Eliminating funding for education and cutting health care funding in half would generate enough savings to cover the cost of eliminating Maine's income tax. If legislators don't want to do this, they could eliminate all state employees and all other departments and agencies funded through the general fund, including the departments of agriculture, attorney general, corrections, economic and community development, judiciary, and inland fisheries and wildlife. But doing so still wouldn't generate enough savings to cover the entire cost of eliminating Maine's income tax.
    2. Raise property taxes by 40%. If lawmakers chose to eliminate state funding for K-12 education property taxpayers would have to fund the entire cost of educating Maine children. At current funding levels that means property taxpayers would have to contribute close to $1 billion toward education. That roughly translates to a 40 percent property tax increase across the state. Of course, communities that are less well-off and currently benefit from a higher share of state aid will incur even more substantial property tax increases to pay for lost state aid.
    3. Raise the sales tax rate to 11.5 percent and the meals and lodging tax rate to 16 percent. Rather than eliminate entire departments in state government or shift education cost to property taxpayers, legislators could instead choose to increase the sales tax to offset the lost income tax revenue. Doing so would require them to more than double both our current 5.5 percent sales tax and our current 8 percent meals and lodging tax.

    There is more detailed MECEP analysis of Maine's current tax and budget deliberations available in the Tax and Budget section of our website, click here.

  • Maine citizens urge lawmakers not to cut funding to towns, property tax relief, schools and public safety

    by Ramona du Houx 

    Deep concerns about rising property taxes and the ability of cities and towns to maintain vital services dominated a public hearing Wednesday on Gov. Paul LePage’s proposed plan to abolish state revenue sharing as part of his proposed $6.5 billion state budget. The proposal is viewed as being a way to shift costs from the state to towns, many of which don't have anyway to pay for the deficit besides raising property taxes.

    Dozens of people, including municipal officials and police, fire and library workers, from all across the state turned out to the joint public hearing before the Appropriations and Financial Affairs Committee and the Taxation Committee to testify against the revenue sharing provision of the governor’s budget. Town leaders from rural Maine – including Aroostook, Franklin, Hancock, Piscataquis and Washington counties – told the legislators about the impact that revenue sharing cuts have already had on their budgets, municipal services and property taxes and how much more their communities would suffer with the elimination of revenue sharing.

    “The state cannot turn its back on local communities,” said Rep. Peggy Rotundo, the House chair of the Appropriations Committee. “Today we heard about the devastating impact that the elimination of these funds will have on schools, emergency services and property taxpayers, especially seniors trying to get by on fixed incomes and young families. We owe it to our towns and their residents and small businesses to protect these vital funds.”

    The LePage budget would end the state’s decades-old revenue sharing arrangement with Maine towns and cities. The state gives back around 5 percent of sales and income taxes to communities, which rely on these funds for services like education, firefighting and road maintenance while keeping property taxes in check. During LePage's last term he already cut the revenue sharing forcing many communities to raise property taxes.

    “We heard repeatedly from town officials across our state that the cuts to revenue sharing are detrimental and miss the mark. We should be looking for ways to reduce property taxes, not shift additional taxes on to homeowners,” said Sen. Linda Valentino who serves on the Appropriations Committee. “No community should have to choose between underfunding and understaffing our public works or police departments in place of rising property taxes.”

    Under the LePage administration, state revenues have increased, but revenue sharing funds to towns have plummeted. From Fiscal Year 2012-2014, Maine reduced revenue sharing funds to Maine towns by 32 percent. If the Legislature does not blunt these proposed cuts, they will be completely eliminated in the second year of the budget.

    Winslow Town Councilor Ken Fletcher, a former lawmaker and LePage’s former energy chief, testified that the elimination of revenue sharing would result in the loss of approximately $940,000 – an amount that is greater that the town’s public works, police or fire budgets. He expressed concern about the increase in the property tax burden that would result from the loss of revenue sharing and the governor’s proposed elimination of the Homestead Exemption for those under 65.

    “It is generally accepted that property taxes are the most regressive of the three primary tax methods. Please do not place more of a burden on Maine homeowners by underfunding Revenue Sharing and eliminating the Homestead Exemption,” Fletcher said.

    “Small rural communities like ours don’t have plush budgets. We don’t have administrators. We have no ‘rainy day’ funds,” Perry First Selectman Karen Raye said in written testimony presented to the committees. “People are angry at their increased property tax bills. This is only going to make the situation worse.”

    Revenue sharing is the only discretionary funding towns get from the state to cover costs like snowplowing – a particularly vivid example given that the forecast calls for yet another storm.

    From plowing to emergency responders to putting down additional salt and sand, municipalities put these dollars to work with each snowstorm.

    Public hearings on the tax portions of the governor’s budget will continue Thursday.