Gov. Baldacci says, “Maine is open for business.”

Maine restructures the tax code, cuts income taxes and expands incentives for business

By Ramona du Houx

July 3rd, 2009 

Gov. John Baldacci hits a homerun for Maine with income tax reduced, the tax code restructured and tax incentives for business
Gov. John Baldacci hits a homerun for Maine with income tax reduced, the tax code restructured and tax incentives for business
Many states have raised taxes to balance their budgets. Maine did the opposite with a budget that was lower than its predecessor and income taxes were cut. How did Maine do it?

“There was an editorial in the Wall Street journal today (June 23, 2009) that talked about Maine’s ‘Miracle.’ They were referring to what we’ve been able to do. First of all, for the first time in 30 years the biennial budget has been less than its predecessor. That’s not by an inch, it’s by a mile — it was $500 million dollars less. We started out with a $6.3 billion proposed biennial budget and finished with a $5.8 billion two year budget. We made substantial cuts without raising taxes, while continuing to provide to the most vulnerable in this society. We rolled up our sleeves and worked together to do the right thing for the state of Maine.

So a possible TABOR tax cap referendum is totally unnecessary?

Yes. We have caps now, on all levels of government. This budget shows people how seriously we take the caps that are there, and state spending. We have worked hard under my administration, under the caps that exist. The LD 1 report demonstrates that annually.

At the same time we found an opportunity to reduce the income tax rate. Our income tax rate has been 8.5 percent, and it begins with incomes of $19,000 dollars or above. So really it hits working- and lower-income people, who are trying to pay the bills and do the right thing, earlier than most any other state. Working with Rep. John Piotti and Sen. Joe Perry and Democratic leadership with Senate President Libby Mitchell and House Speaker Hannah Pingree, we have been able to come up with a program that reduces that from 8.5 percent to 6.5 percent.

We are also rewarding investments, as capital gains are reduced from 8.5 percent to 6.5 percent. Now there are incentives for small businesses to make capital investments, and hardworking people can spend more of their incomes.

We were able to do that by broadening the sales tax and trying to have tourists and part-time residents pay a little more of the load. Those extra resources are enough to lower the income tax rate. For Mainers who may be hard hit by some of these expansions of these sales taxes, we’ve provided a refundable tax credit. So people earning $33,000 or less will get a refundable tax credit to help them bear the brunt of increases anywhere; at the same time they will see their income tax decrease. It works for middle- and lower-income people, for families, and for small business and business in general.

According to that Wall Street Journal editorial, Maine’s tax rate will fall to 20th from seventh highest among the states. Is that a big deal?

It’s a very big deal. I’ve already gotten calls from people who are part-time residents who want to come to Maine and become full-time residents, because the states they live in are raising their taxes. People will begin to see those benefits in their paychecks the first of the year.

Recently you signed a new law that expands Pine Tree Zones for the entire state. How does that help?

We’re definitely putting the neon sign out there that says, “Maine is open for business.”

We got a letter from a Limerick business that was the first company to be certified under the program. The owners wrote that they are very appreciative of the benefits and that they will be expanding their operation.

Our Pine Tree Zones are the most aggressive economic tools in the country. Along with a highly capable, productive, honest workforce, and the ability to do business here and around the world, Maine is placed well for future growth. Once we get through the recession, we will be able to hit the ground running. My hope is that you will see some of this growth as we begin 2010.

You recently, with the congressional delegation and UMaine’s Dr. Dagher, sat down with Energy Secretary Chu in Washington, DC. How did the meeting go?

Gov. Baldacci and the congressional delegation meet with DOE Secretary Chu in Washington, D.C. to talk about Maine's offshore wind potential
Gov. Baldacci and the congressional delegation meet with DOE Secretary Chu in Washington, D.C. to talk about Maine's offshore wind potential

I think we had a good trip, and it will bode well for Maine. We got clear direction from the secretary that the work with the Norwegians is very important. The Norwegians have excelled in offshore wind development. We will be visiting an installation in Norway to learn more about their facility, later in the fall. We hope to bond that relationship, so we can leapfrog an incremental approach for the international research center of excellence we proposed.

Was the EnergyOcean Conference important?

It was huge for Maine. We had the opportunity to show the international community what we have to offer. In the Gulf of Maine we have enough wind power to displace 40 nuclear power plants. And we learned what other areas are doing in wind, wave, and tidal energy, with experts from the government, companies, and organizations.

Since the governor has been in office, he has been building on the state’s natural strengths to grow the economy. Maine’s most economically depressed county could become The Washington County economic miracle. The governor explained:

Cooke Aquaculture, by the end of the year, will be one of the largest employers in the area. They’ve been working with R&D at the university extension, improving farmed salmon stocks.

Washington County has the deepest deepwater port in Maine, which will attract opportunities for windmill siting and potential manufacturing of windmills, because they like to be close by to where they erect those towers. Their tidal power potential is tremendous.

When the Lincoln Mill closed, people told me not to get involved, because it’s not something governors get involved in. We took it out of bankruptcy, had a state of emergency declared, and brought in the state police to protect the assets, so the bankruptcy people didn’t cut up the machinery. Now the mill is doing a good business.

At the Domtar mill, 300 people who will be earning over $50,000 a year have been put back to work. The mill reopened because, while working with them, they became committed to repurposing the mill to become one of the new biorefineries of the future. The company is excited about those possibilities. With the unexpected uptick in the pulp market, the workforce is back sooner than anticipated. If you can make things happen, and you see people go back to work, you know that’s your most important responsibility.

Mars Hill and Danforth are New England’s two largest wind farms. Washington Co. is demonstrating how we go against the grain. They have the underpinnings, in the renewable energy area, to put the area on the map and reinforce Maine’s prominence.

How are the weatherization and energy-transmission plans progressing?

The first thing we are doing is getting crews spread out across the state, weatherizing homes in energy efficiency this summer. That first wave builds momentum, expertise, and more business interest. Already we have alternative-energy companies springing up. More renewable energy will be generated with windmills on land and now with new shore and offshore opportunities. In order to transmit that energy, we need transmission inner connections to get that renewable power to the New England market.

Gov. Baldacci signs the state budget
Gov. Baldacci signs the state budget

Maine has this once-in-a-lifetime opportunity, like we did with hydropower, and having mills attached to the hydroelectric facilities employing thousands of people. We have that same opportunity now to advantage our people, our resources, and our location to the market. And it’s all about location.

We want to weatherize all the homes in Maine in 20 years. Stimulus funds will pay for the first two years. The effort is huge. We have 400 homes, apartment houses, and businesses to weatherize, which will cost over a billion dollars. We will need a funding source after the stimulus runs out. The question is how can we do it without a charge on electric bills? We know people are paying as much as they can now.

The answer is to use our transportation highway, our network of public resources. It’s a smart, innovative way. It’s better for utilities to use that corridor rather than going through 108 towns and cities, where they would have to get local approval for permits and pay local taxes in each one of those towns. It’s cheaper and more efficient for them to use highway 95 or another right of way that the state owns. Like some of the 1400 uninhabited islands off the coast, or take The Riverbank Wiscasset tidal project that will be able to go ahead with their plans using submerged land. The state can then use the revenues that we gain from leasing our land to do a revenue bond that will help us to pay for the continued weatherization. This way Maine people will get the advantage of being able to weatherize, use less imported energy, and save money, reduce pollution, and put people to work.

How would you characterize your work as positioning the state as a leader in innovation in the global economy?

Using Michael Porter’s and Karen Mills’s research, the Council of Economic Advisors, and the Brookings Report, we have a map of where we need to go. We know we have to be strategic with our resources, and we are trying to keep to that game plan.

They identified the state’s various strengths — Maine’s clusters.

The Brookings Report told us what we needed to do. We had too many local, school, county, and state administrations. We needed to reduce spending there. We needed to invest more in research and development in targeted clusters. We needed to recognize that those strengths are where our expertise should be, so we aren’t trying to be something we’re not. Building on those strengths, with investments, there will be a greater economic ripple effect.

The thing I feel the most confidant about is what we are doing and how we are doing it. We’re setting a foundation and infrastructure that will be around for a long time.

President Obama’s been in office for four and a half months. What has it been like working with an administration that has the same objectives?

The White House is interested in the areas of energy, energy self-sufficiency, addressing climate change, investing in education for all ages, research and science, universal healthcare, transportation and energy infrastructure, and the importance of broadband Internet connections. They realize that we need to take care of the home front, instead of pouring too many resources overseas. What they are trying to do in all these sectors, we’ve tried, and we’ve gotten going on a small scale here.

We’ve moved forward on these issues, because that’s the way we are as Mainers. Maine leads the way — whether it’s by lighting one candle at a time or returning a starfish to the ocean, one at a time. Through the accumulation of independent actions, here, nationally, and internationally, currents build that help us get to destinations and achieve goals — goals of universal healthcare, energy sustainability, addressing climate change, and sustainable jobs for people.

Really, having someone working along the same lines nationally makes it so much easier, because we have a partner there. It’s been a welcome relief, even with the recession, as bad as it has been. They have given us stimulus funds that we have used to pay down hospital debts, make investments in medical scholarships, education for early childhood, and education funds that we can use to defray some of the General Fund cutbacks in local education. We won’t see teachers being laid off and programs discontinued. We were the first state to finish allocating Recovery Act funds to transportation infrastructure projects, employing hundreds this summer. They have been real partners.

Would you agree that there are a lot of similarities with the president’s healthcare objectives and Dirigo Health?

Cost, quality, and access are common objectives. He’s struggling with the same issues of sustainability, about the impact on the budget, and also to the individual. I think he’s got it right. Even the public supports a public option.

I think a public option provides for two things: a benchmark as to what’s taking place in the industry and a stimulus for competition. Nobody should disagree, especially conservatives, that competition is good for the consumer. It enhances choices and reduces cost.

We’re working on this quality program where we give ratings to providers and the State establishes star ratings for hospitals. We’re trying to use competition, increase quality, and expand access.

DirigoChoice also accepts preexisting conditions and yearly checkups. Health care should be about becoming healthy, not about covering catastrophic expenses.

The Universal Wellness Initiative is all about providing people with more healthcare information, so they can become their own doctors and decide about eating, drinking, and exercise habits themselves, which has an enormous impact.

We’ve been able to reduce our state health insurance contributions, because of the wellness facility we have, and the people using it. It’s free and open to state employees and families. We renovated an old gym at the AMHI grounds. We’ve reduced our healthcare budgets by having that facility available.

Some insurance providers and companies are taking pointers of what the state is doing in terms of their own healthcare programs in the workforce and in their insurance products. They’ve said, we admire and want to copy the work that’s been done, by the state.

Vice President Joe Biden, on a conference call to reporters, said he is in regular contact with governors about the stimulus. What issues have you brought up with him?

The administration initially made a conference call to governors, asking us if we had questions or needed guidance. They wanted to let us know how they could be helpful in the process. I remember saying to Vice President Biden, “I really appreciate your being able to do this. If you could do it in the future, because the issues, problems and challenges change, that would be great.” Sure enough, he listened; they’ve been calling us every two to three weeks.

The state’s designated stimulus person, Ryan Low, makes sure we disperse the funds in an open and transparent way. He gives me a list of issues, if there are any. Predominantly he always starts by saying that I should give them a big thank you from our public safety commissioner. She speaks so highly of the Justice Department’s help and guidance on the COPS grants request and the Drug Enforcement grants request.

During the last call, we needed guidance for Department of Labor funds and Vice President Biden said they were putting them out Monday.

They are very responsive, and when there are issues they are quick to respond.

The president seems to be taking a page out of your playbook as to how to do things. Do you think your leadership style is similar?

My heart goes out to him. Political parties create fights to prove their existence. That’s unfortunate when our country has so much at stake. He is trying to reach across the aisle. In his own cabinet he’s taken the Lincoln approach with a team of rivals — Republican congressmen, Republican governors, former opponents in the primary. He has selected the best in both parties. He wants them to focus on a common mission, which is repairing and reinvigorating our national security and our economic security. He is about everybody joining forces for that mission. I think I started the same way.

His healthcare initiative convened a round table with all the different issues, pro and con, to get beyond those fights that opened up when Hillary Clinton tried to enact healthcare reform in ’93 to ’94. President Obama was willing to sit down with the same people who created ads then that fought that effort. He wants to have people realize we are all in this together.

We may have come over in different boats, but we are all in the same boat together. We either sink or swim. I’d rather swim. I admire his leadership, the way he is trying to do things. I just don’t want the president to get discouraged. He knows the direction the country needs to go in. He’ll keep his compass pointed in that direction.