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.
Editorial by Rep. Peggy Rotundo, D-Lewiston, the House chair of the Legislature’s Appropriations and Financial Affairs Committee. Editorial first appeared in the Bangor Daily News
A strong middle class. A solid foundation for our children’s future. A secure retirement for our seniors.
This is what Democrats are fighting for every day. We believe that if you work hard, you should be able to build a life for your family, put your kids on a pathway to success and expect to age in dignity.
Here in the State House, this is what we have in mind as we craft legislation, debate policy and build a state budget. Tax conformity is no exception.
States regularly face the question of tax conformity. The heart of the issue is whether a state wants its tax code to mirror that of the federal government and, if so, by how much.
A bill that deals with tax conformity is making its way through the Maine Legislature. There’s much to like about tax conformity, including predictability for Maine families and businesses that need to file tax returns in a timely fashion and tax relief for Maine’s small businesses, homeowners, students and teachers who use their own hard-earned money to provide supplies in their classrooms.
Democrats embrace the parts of the tax conformity bill that help Maine’s middle class grow and thrive. We strongly support the mortgage interest deduction because it helps Mainers become homeowners and establish their financial security, the deductions for higher education costs because they help young Mainers gain the skills to compete in a global economy, and the incentives for small businesses because they help them grow and create jobs in Maine.
But the tax conformity bill put forward by Gov. Paul LePage isn’t simply about syncing the federal and state tax codes. He has sent the Legislature a proposal that includes an element that needs our careful scrutiny. It’s called the Maine Capital Investment Credit, and it primarily benefits large corporations based outside of Maine. It would cost Maine taxpayers $23 million.
The Maine Capital Investment Credit is Maine’s version of bonus depreciation. But rather than precisely mirroring the federal program, it is altered in significant ways. These types of programs were originally intended to help the economy during the Great Recession, but it’s not at all clear how effective they truly are. It’s worth noting that no other New England state is adopting a program like this. That ought to give us pause as we decide whether this is the most fiscally responsible use of $23 million of Maine taxpayer money.
Democrats question whether this is the best use of $23 million. We see need in our classrooms. We know that property tax relief is needed by families, local businesses and seniors whose ability to stay in their homes is threatened by property tax spikes. We know we must also address priorities such as improving services for veterans, boosting economic development through broadband access and combating the drug crisis that is killing five Mainers every week.
Many school districts across Maine are grappling with the news that the state will be providing them with less support for education. Recently released projections from the state Department of Education indicate that in many local communities, the state share will be dramatically lower for the 2016-17 school year. Maine property taxpayers are facing a total shortfall estimated at $23 million.
This leaves communities in the position of making cuts in the classroom or having their local property taxpayers pick up a larger portion of the tab.
Will the education of a community’s children have to suffer? Will young families trying to get established and seniors on fixed incomes see their property taxes go up? Will towns have to cut back on services such as emergency personnel, road maintenance and trash pickup?
We cannot simply provide a $23 million tax break to large corporate filers headquartered out of state without close scrutiny. That would be an affront to Maine taxpayers — the families, seniors and local businesses that expect us to be working on their behalf.
If we are going to provide tax relief to businesses, we ought to prioritize the small Maine businessess that form the backbone of our economy. They make up nearly 97 percent of our employers, employ the majority of Maine workers and are committed to Maine communities.
We will not simply rubber stamp the governor’s proposal as is. We will fight for the best deal for Maine people. We will put Maine first.