Probing Politics: The Legislature's taxing logic
Here’s a question that most people outside the capitol in Augusta could answer correctly with very little policy background. If Maine wanted to encourage retaining high-wage manufacturing jobs would it A) increase the tax on fuel and electricity used in manufacturing or B) retain or even reduce the tax on energy?
While most citizens know that answer B, lower energy costs, makes Maine-manufactured products more competitive in world markets, it seems to be a logic that escapes a majority of the Taxation Committee.
Last week, the Taxation Committee, chaired by Sen. Joseph Perry, D-Bangor, and Rep. Thom Watson, D-Bath, advised their colleagues on the Appropriations Committee that they can raise about $4.6 million by reducing the state’s current energy tax exemption for manufacturing – a recommendation made without the benefit of a public hearing.
Maine’s cost of electricity for industrial users is the eighth most expensive in the nation at 9.6 cents per kilowatt hour versus a national average of 6.4 cents per kwh. That makes Maine a third more expensive than the national average. If you own a manufacturing facility in Maine and have considered moving or expanding your operations elsewhere, an added tax is the kind of news that could energize your decision.
Proponents of the higher tax say the exemption was intended to create jobs. In this global recession, though, many manufacturers are laying off workers so, in the mind of a majority of the committee, the exemption isn’t working.
It may be, however, that the committee’s majority had their eyes on Maine’s pulp and paper industry. According to John Williams, president of the Maine Pulp & Paper Association, “nine pulp and paper mills would be paying about 75 percent of this new tax.” Apparently, these Committee members haven’t heard that paper mills in South America are producing paper from fiber that grows a foot per day compared to a foot per year in Maine and labor costs are a fraction of Maine wages. They also may think that paper machines can’t be moved, but they’d be wrong.
It is hard not to conclude that far too many legislators perceive that our largest employers have limitless deep pockets to manufacture money for the use of public policymakers. It’s part of their taxing logic. Many of these same legislators are touting Maine’s fledgling composite manufacturing as a growing niche in Maine’s employment picture. Composite manufacturing, though, also is highly dependent on affordable energy costs. This tax will not land on only nine paper mills.
In a plea to the Appropriations Committee, the pulp and paper folks also noted that the Legislature recently reduced the Business Equipment Tax Rebate by 10 percent and raised the cost of unemployment taxes by $55 million. A majority of the Taxation Committee also advised the Appropriations Committee that they ought to increase corporate filing fees from $85 to $150 on all Maine companies and an increase from $150 to $450 for out-of-state companies; another little nibble chewing away at the foundation of the Maine economy.
When added to Maine’s penchant for one-of-a-kind laws that impact business, these added costs not only chill investment decisions, but they add to Maine’s persistently low ranking as a business-friendly state.
According to six national rankings of the 50 states, Maine is in the bottom third for being a good place for business and the jobs they create:
• Anderson Economic Group, 2nd worst.
• Small Biz Survival Index, 5th worst.
• US News, 4th worst.
• Forbes.com, 9th worst.
• Economy.com, 8th worst.
• Tax Foundation, 16th worst.
A panel discussion on MaineBiz Sunday that will be televised this week includes the president of the Maine Development Foundation, the president of the Maine Technology Institute, State Sen. Chris Rector, R-Thomaston, and me. All of us agreed that many exciting developments are underway in Maine’s business community. The prospect for well-paying jobs and business growth is positive in spite of state government. However, those who are on the cutting edge of new technology ventures should be politically vigilant lest they, too, become perceived as successful in the Pine Tree state and the object of the taxing logic.
This tax on energy, mandatory paid sick leave, cell phone warning labels, double-dipping for unemployment benefits, a ban on corporate rights for local companies, high costs for health care and a tax on health-care services are not the formula for ensuring our children have high-paying career opportunities in Maine.
These are just some of the proposals and policies of the 124th Maine Legislature. Fortunately, many have been dismissed as ill-conceived, but the damage done by merely suggesting them does irreparable harm to Maine’s reputation and our economic future.
What do you think?