Governor John Baldacci briefs the press on the state of Maine’s taxes. Photo by Ramona du Houx

June/July 2006

By Ramona du Houx

Taxes — the word that is so overtaxed during elections.

Taxes — the word usually gets an emotional reaction. And that is what some political players are hoping for during this election cycle.

Consider this — the majority of people in Maine believe that society has a responsibility to take care of its citizens. In truth it does take a village to raise and nurture our children. It takes people looking after one another — neighbors helping neighbors. And it takes money.

When the village can’t afford to look after its people, improve their roads, provide incentives for businesses, or provide educational infrastructure, they look to state and federal government for help.

The tax we pay comes back to us to help our communities and state grow. We are all in this together.

“But,” some complain, “why hasn’t the governor lowered taxes?”

Sometimes the best way to understand a situation is to try and imagine yourself in the shoes of the one you question.

How would you handle the state’s financial situation at the time when Governor Baldacci took office?

At the time we were in a recession, and he inherited a $1.2 billion structural deficit — that’s $1.2 billion — which would have made it irresponsible to lower taxes.

He faced continual cutbacks from the federal government.

Maine is not a wealthy state; we rely heavily on federal funds. When these are cut, the state has to make up the difference. Other states increased taxes to make up the difference — not Maine.

Governor Baldacci managed to balance the budget every year, continued to look after all the people in Maine, created Dirigo Health, and community colleges, increased educational funding by $280 million, and continues to improve our business climate and position Maine in a knowledge-based economy, while protecting our environment.

—  Maine no longer has over a billion dollars in debt.

—  In fact the governor in July announced a fiscal year surplus of $74.1 million.

—  From the surplus $30.6 million will go to address future long-term liabilities.

—  The state’s reserves are now at $149 million — Maine has money in the bank.

From the mandated Medicare D program, the lack of help when fuel prices skyrocketed, to homeland security policies, the Bush administration’s programs and polices have endangered people by not providing funds when people most needed them.

The governor’s fiscal responsibility gave him the leeway to respond accordingly, without having to worry about the state’s finances. “When it came to a point where seniors needed their prescription drugs because Medicare D wasn’t working well, we were able to be there. When it came to low income heating assistance to make sure our seniors and disabled didn’t freeze to death in the winter, the state was able to respond. I’ll never abandon our most vulnerable. To preserve and protect the citizens of the state and the finances of the state is my most important and solemn obligation,” said the governor.

The federal budget cuts — across the board — to programs that states rely upon, end up cutting further into every state’s finances.

Having “money in the bank” enables the state to meet the challenges the Bush administration poses when they make budgets that are not fiscally responsible.

If the nation’s economy has a downturn, having money in the bank will give Maine a safety net.

Without the governor’s policies, Maine could have gone deeper into debt — which discourages business growth.

Imagine living with $8 trillion in federal debt on top of a large state debt. Sooner or later someone would have to pay, probably in the form of higher taxes at the state and federal level. Too much debt stagnates economic growth. Debt can destabilize the economy.

Recently the governor, working with business leaders and the Legislature, eliminated the Business Equipment Tax program that was hurting businesses. Eliminating BETR makes Maine more attractive to businesses.

The governor kept to his promise of not raising broad-based or sales taxes. This policy has proven to be the key. By holding the line on taxes, while balancing the state’s budget every year and implementing his policies, the governor has led Maine to economic stability.

This stability has led to a successful sale of Maine’s bonds and a good bond rating by the three agencies in New York City.

This stability has led to real sustainable growth.

USA Today analysis shows that Maine’s long-term income growth over the last five years exceeded the national average. Maine’s per capita income grew 6.1 percent from 2000 to 2005, compared to the national average of 2.2 percent.

In the “Summer 2006 State Profile” the Federal Deposit Insurance Corporation (FDIC) report said that Maine is expected to see growth in jobs and the economy over the next two years.

“This independent source reports a positive outlook for Maine’s economy and jobs for years 2006 and 2007,” said Governor Baldacci. “Maine’s economy is growing,” said the governor. “And while our work isn’t done, the FDIC report confirms that we are moving in the right direction. My administration has, over the past three years, balanced the state budget without raising income and sales taxes. It hasn’t been easy, but we accomplished this while protecting the vital safety net for Maine people and making crucial investments to grow the economy. We’ve kept spending down, having the lowest increase in the state budget of any previous administration in 30 years.”

Maine’s unemployment rate remains below the national average.

Governor Baldacci, working with the Legislature, has turned Maine into a state with a stable business climate — exactly what businesses look for when setting up shop.

“One of the main reasons we had for coming to Maine was the business climate here; we thought it was very positive,” said Paul Sellew CEO, of U.S.F.F.

“The governor’s pro-business initiatives and successful tax incentives are helping existing businesses expand, as well as attracting new business to the state,” said Department of Economic & Community Development Commissioner, Jack Cashman.

According to the Maine Development Foundation report in 2004, over 4,300 new businesses started in Mane, a growth rate of 6.2 percent over the previous year. New business start-ups across New England increased 3.6 percent over the same period.

“This measure is an indicator of the vibrancy of the economy. Growth in new business starts demonstrates entrepreneurialism, job opportunity and business vitality,” said the report.

One of the most important things a governor can do to help businesses small and large is to ensure there is a stable business climate.

This stability continues to encourage the entrepreneurs of the creative economy to start new businesses.

During the past three and a half years Maine’s resident employment increased by 28,700 (6,700 in the past six months). Many of these new entrepreneurs work from home over the internet, or commute to other states.

The governor is a long-term planner who has been implementing his vision for Maine — a vision that is bringing new businesses and economic prosperity to the state.

“Maine is on the right path,” said Cashman. “We are now competing in a global economy. This administration is committed to increasing research and development into such technologies as wood composites, energy independence, and communications. The governor is committed to transforming our traditional industries to keep them vibrant into the future, and to grow new business and industry for new opportunities for Maine families.”