Gov. Paul LePage’s call for further phased reductions in (and eventual elimination of) Maine’s personal and corporate income tax was rejected by both branches of the Maine Legislature, and by many in his own party.
His initial approach was to propose a constitutional amendment that would achieve these ends. If adopted, this approach would all but preclude efforts to resurrect the income tax in the future. However, to bring an amendment forward requires two-thirds approval in both the House and Senate, and the votes were simply not there.
LePage then proposed to reduce or eliminate the income tax via a citizens initiative. He joined his income tax agenda with his welfare reform agenda, and is now in the process of gathering the 62,000 signatures needed to put these measures before the voters in November 2016.
In an effort to gain citizen support for this initiative, the governor has embarked on a statewide series of town meetings. He vows to continue these meetings through 2016, presumably right up to Election Day. He is nothing if not dogged in the pursuit of his goals.
In the meetings held to date the governor talks a lot about the economic benefits of returning tax dollars to the people. Conspicuously absent in these meetings is any discussion of how we make up the nearly $1.6 billion dollar annual revenue loss created by eliminating income taxes.
LePage’s call for raising and expanding the sales tax was recently rejected by Republican voices in the Legislature. Similar proposals were rejected by a Republican-led initiative five years ago.
The governor’s suggestion that individual towns could maintain the services they value by raising property taxes is disingenuous. He knows that property tax burdens in Maine are already high. He knows that most Maine towns do not have a property tax base capable of being raised to offset lost income tax revenues.
The reality is the governor has no plan to make up the revenue loss. He wants a smaller state government. His budgets over the first five years of his administration have proposed spending cuts to public schools and at the university level; cuts to road, bridge, and other infrastructure needs; cuts to revenue sharing, public health and safety needs.
Without income tax revenues the array and depth of these budget cuts will increase significantly. Is this the Maine we want?
One in five Maine children already live in poverty. A wide range of essential programs and facilities are already underfunded, among them jails, indigent legal assistance, elderly housing, and drug and mental health programs. We can’t seem to find the money to re-certify the Riverview Psychiatric Center, which costs us $20 million a year in Federal aid. The list goes on.
Beyond the steep and damaging cuts in essential state programs, eliminating the income tax gives rise to a huge economic windfall to Maine’s very wealthy. Maine Center for Economic Policy data shows that the top 1 percent of Maine taxpayers will receive an average benefit of $61,000; a much larger group of middle-income Mainers will receive an average of $900.
Moreover, if some part of lost annual income tax revenues is offset by sales and property tax increases, middle-income taxpayers will quickly see their income tax benefit evaporate. For most Mainers the total annual tax burden will almost certainly increase.
The abandonment of a progressive income tax will give rise to an overall tax system – one already skewed to benefit the rich – that is even more unfair. State and local governments will be forced to rely on regressive sales and property tax revenues, taxes that invariably weigh more heavily on low- and middle-income families than they do on the wealthy. This makes no sense.
The idea that cutting or eliminating the income tax will somehow spur the economy (and offset revenue losses) did not originate with Gov. LePage. Increasing the wealth of the wealthiest in the belief that their spending and investment will stimulate the larger economy is vintage “trickle-down” economics.
In spite of Republican and tea party claims that this economic theory works, no evidence supports their claim. Bush tax cuts didn’t prevent the recent steep recession; they didn’t lead to a quick healthy recovery. Most economists dismiss the theory as absurd.
At the national level, from the Eisenhower to Clinton administrations (50 years) we enjoyed unparalleled economic growth, a generally healthy economy, a narrowing of income disparities – all with progressive income tax rates much higher than they are today.
At the state level, recent data indicates that four of the five states with the largest cuts in public school spending (Arizona, Idaho, Oklahoma, and Wisconsin) had sharply cut their state income taxes.
This is where LePage’s income tax policies, and his town meeting rhetoric, would take us. It is unacceptable.
Orlando Delogu of Portland is emeritus professor of law at the University of Maine School of Law and a longtime public policy consultant to federal, state, and local government agencies and officials. He can be reached at email@example.com.