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  • GOP gives huge tax breaks to top 1 percent while raising taxes for working Mainers and seniors

    Distributional analysis of Maine Republican and Democratic tax plans

    By Ramona du Houx

    The saga of sorting out the various tax proposals under consideration this year is epic. Yet, simplified, it comes down to two camps with different principles. One wants to strengthen the middleclass, grow jobs, and give a hand up to the working poor. The other wants to give Maine's top 1 percent huge tax breaks. The most recent Republican tax plan increases taxes for working Mainers and seniors while decreasing taxes for the rich. While the Democritic plan lowers property taxes and helps to lower some income taxes.

    When Gov. Paul LePage wrote his extreme tax plan into his budget proposal, he made it harder for lawmakers to sort out the actual two-year budget. LePage’s tax expenditures and breaks projected into the future, which is something a two-year budget is not designed to do.

    Seeing the damaging impact that proposal would have on citizens - as property taxes and sales taxes would certainly rise under LePage’s plan - Democrats revised it making sure middleclass workers and the poor would have “a better deal.”

    In an attempt to sidetrack lawmakers and refocus the media the governor announced his legislation to end income tax. The Tax Committee rejected that.

    Then, after months of work from the Appropriations Committee, the place lawmakers form the budget - the governor gives them a makeover of his original tax plan - at the last minute. Keep in mind adjournment of the legislature is in a matter of weeks. If they don't finish the work, taxpayers will have to pay for their extra time. Something LePage, no doubt, could have had in mind as he tried to ramrod his new plan.

    LePage's tactics are getting old. Even folks in his party are revolting. The following is what the economist Garrett Martin, of the Maine Center of Economic Policy has to say about their proposal:

     

    Legislative Republicans have released a tax plan that is a bad deal for working Mainers and seniors living on fixed incomes. Based on preliminary analysis the Maine Center for Economic Policy conducted in conjunction with the Institute on Taxation and Economic Policy, Mainers with income less than $57,000 will, on average, receive a tax increase under the Republican plan. That means approximately 60 percent of Maine people will get a tax increase on average if the Republican plan passes.

    The Republican plan is a bad deal. It prioritizes income tax cuts for the wealthy and corporations at the expense of the rest of us. Future impacts will be even worse as the Republican plan shifts more costs to low- and middle-income property taxpayers and it further compromises the state’s capacity to fund our schools, provide for low-income seniors, children, and people with disabilities, and maintain vital public services.

    The Republican plan reflects the discredited theory that income tax cuts will put Maine on the path to prosperity. They won’t. Maintaining public investments in our schools and communities will. And a robust and progressive state income tax is the foundation of such investments. This will not only help secure funding for public investments beneficial to all Maine families and businesses, it will also create a tax system where what the rich and poor pay in state and local taxes as a share of their income is more fair.

    Stay tuned as we release more analysis on the Republican plan. In the meantime, MECEP urges lawmakers on both sides of the aisle to work toward crafting 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.

  • Democartic Tax Deal for Maine is fiscally sound, politically sophisticated and true to core values

    Since Gov. LePage’s first election, Maine Democrats have been throwing from their back foot, unable to out-message or out-maneuver the governor and championing policies that failed to resonate with Maine’s working-class voters.

    After last November’s elections, I noted, “You cannot look at the electoral map without concluding that working-class voters lost faith with Democrats up and down the state, relegating them to the party of Greater Portland, the gold coast and a smattering of inland communities.”

    But last Thursday the Democrats finally found their footing and powerfully re-inserted themselves into this Legislature’s pre-eminent policy debate – tax reform – by offering their aptly named Better Deal for Maine.

    I’ve written favorably about the governor’s tax reform proposal in the past, noting, among other things, that it initiated an earnest and overdue dialogue about wholesale tax reform and modernization. I’ve also critiqued its reliance on sales and, more importantly, property tax increases and the $300 million hole it blows in the state budget when fully implemented.

    Democrats and progressive groups also correctly observed that the bulk of the governor’s tax relief was directed toward the wealthiest among us, providing more than $10,000 in relief to those earning $400,000 a year, compared with $145 for Mainers earning $40,000.

    Yes, the governor admirably proposes to eliminate income taxes for a family of four making less than $48,000 per year, but we can all agree that remaining swath of Maine’s middle income families – many of whom struggle daily to make ends meet – are more desperately in need of a tax cut than the top 1 percent.

    The Democrats’ plan delivers 98 percent of tax relief to the bottom 95 percent of Maine families while putting more money in their pockets than the governor’s deal does. The Better Deal for Maine is also balanced, neither leaving a multimillion-dollar budget hole for future Legislatures nor necessitating massive cuts to education and social service programs in the out years.

    What’s more, the Democrats’ proposal isn’t just smart policy – it’s also smart politics. The gap between rich and poor has grown at a faster rate in the United States than in any other developed country, with the top 1 percent capturing 95 percent of post-recession growth (since 2009), while 90 percent of Americans became poorer.

    This issue of income inequality is now such a potent, bipartisan political issue that Republican presidential contenders – from Jeb Bush to Ted Cruz – are deploying populist economic rhetoric nearly identical to that of President Obama and Sen. Elizabeth Warren.

    So Republican legislators must decide not only whether they’ll move a significant piece of tax reform legislation, but also if they’ll prioritize the economic interests of the vast majority of their lower- and middle-class constituents. Given the populist economic messages and policies likely to dominate the 2016 contests, the electoral consequences of that decision could be immense.

    The Democrats also shrewdly incorporated – and in some cases improved upon – several of the best elements of the governor’s plan, including the elimination of the sales tax exemption on services, the creation a refundable sales tax credit for low-income filers and doubling the homestead exemption for all resident homeowners, rather than simply seniors as LePage proposed.

    The Democrats also understood that it’s property taxes, not income taxes, that low- and middle-income Mainers feel most acutely. Under LePage’s plan, municipalities would lose $250 million in revenue sharing over two years, while also absorbing more education costs. Rather than relying on local taxpayers to make up that difference in higher property taxes, the Democrats’ plan actually increases municipal revenue sharing and provides $20 million more in school aid.

    But the most politically cunning element of the Better Deal is Democrats’ rejection of the governor’s plan to raise the sales tax rate from 5.5 percent to 6.5 percent. Raising sales taxes – or any taxes, for that matter – is an anathema to legislative Republicans. And now it’s LePage, not Democrats, calling for its increase.

    Yes, the Democrats’ plan increases revenue in 2016 by $100 million (compared to LePage’s $44 million), but they smartly left that money unappropriated and on the bargaining table. That leaves a lot of cushion for striking deals and potentially directing those funds toward Republican priorities.

    With two plans now on the table, the Legislature is within striking distance of a historic, bipartisan tax reform deal. Whether they’re clever enough to compromise and seize the day is yet to be determined. For his part, the governor will almost certainly try to undermine them at every turn.

    The Better Deal for Maine is fiscally sound and politically sophisticated. It’s also true to Democrats’ core values of protecting the most vulnerable and increasing economic opportunities for the middle class. With it, Democrats are finally back in the game.

    Michael Cuzzi manages the Boston and Portland offices of VOX Global, a strategic communications and public affairs firm headquartered in Washington, D.C. 

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