Policy Wonk: Thanks to LePage, Maine leaks revenue in 2 ways

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Gov. Paul LePage is nothing if not relentless in pursuit of a tea party fiscal agenda.

He would directly cut state taxes (primarily for wealthy individuals and corporations) and indirectly give money to corporations by expanding and/or creating new tax expenditures, i.e., tax forgiveness, credits, reimbursements, and exemptions.

These two strategies reduce state revenues; they necessitate endless rounds of budget cutting to essential state services – budget cuts Maine will continue to face for years to come if we don’t stop this leakage of state revenues.

At national and state levels of government these strategies are the cornerstone of Republican orthodoxy. Under the labels of “Reaganomics” and “trickle-down” economics, it is asserted that these strategies (without more) will stimulate economic growth and job creation.

It hasn’t happened. Indeed the evidence is overwhelming that these strategies have not worked.

At the federal level, continuous rounds of Reagan, Bush I and Bush II tax cuts (benefiting the wealthy and large corporations) did not prevent the economic downturns of 1981-’82, 1990-’91 or the massive downturn in 2007-’09; recovery from this last downturn was not facilitated by the lowest level of federal tax rates on individuals and corporations since the 1930s.

In short, low federal taxes do not ward off recession, facilitate recovery from recession, or produce sustained economic or job growth. They have only increased the nation’s debt and produced the highest level of income inequality in the nation’s history.

At the state level, urged on by ultra-right-wing billionaires such as the Koch brothers, powerful corporations, and think-tanks like the Heritage Foundation and the American Legislative Exchange Council (ALEC), Arizona, Florida, Kansas, Ohio, Oklahoma, Wisconsin – and Maine – have aggressively pursued tax cutting and corporate give-away policies.

Other states –Alabama, Indiana, Louisiana, and South Carolina – have adopted these revenue-reducing policies piecemeal and/or in a somewhat less aggressive form.

But none of these states have experienced significant job, economic, or personal income growth. In most cases their experience lags national income and employment growth.

What all these states, including Maine, have experienced (in varying degrees) is revenue shortfalls. And because states (unlike the federal government) must balance their books annually, they have had to make cuts in school, road, social service, and other infrastructure expenditures.

As revenue-reducing policies expand year after year there will be less and less revenue and further rounds of cuts to essential state services.

But apologists for these failed strategies are unrelenting. They are the usual suspects: a handful of economists, wealthy individuals and corporations (for whom enough is never enough), leading Republican politicians including Gov. LePage, and sadly all of the current Republican presidential aspirants.

These individuals (and their well funded think-tanks) ignore the fact that during the Truman/Eisenhower era (and for years thereafter) federal taxes were much higher than they are today and we enjoyed solid employment and income growth.

They ignore the fact that taxes pay for essential services and social investments that the private sector is unable or unwilling to provide.

They ignore the reality that governmental spending stimulates economic growth in the same way that individual and corporate investment does: it innovates (NASA and the National Institute of Health, for example), it builds things (rail and port facilities), and it employs people who in turn purchase goods and services that the private sector makes available.

Their view that government, government policy, and government programs have never created a job is absurd. School teachers, public safety, military, air traffic control, court personnel, and construction workers building and repairing highways and bridges – the list is endless – these people all hold down important jobs.

There are millions of them in every corner of the nation. They are directly or indirectly employed by government and paid by tax dollars; they provide essential infrastructure, services, and public goods that enable the private sector to operate with maximum efficiency.

That’s what has made this country great for more than 200 years – a robust governmental sector working with a robust private sector. One without the other will not produce long-term economic well being.

In Maine we are in danger of forgetting the basics, i.e., that total state revenues are reduced in two ways: directly by cutting taxes, and indirectly by creating tax expenditures that unfairly allow some individuals and corporations to receive tax credits, exemptions, and reimbursements. These are designed, ostensibly, to achieve some justifying public benefit.

But we often do not know how much benefit is actually being received, and we do not keep accurate account of how much revenue is annually lost by these tax expenditures.

We do know that total state revenues are being aggressively reduced by LePage’s utilization of both of the methods. This fact is borne out by the endless rounds of budget cutting that his tax policies have made necessary.

It must end. These cuts have hurt everyone, and mostly the poor. Average Mainers have seen their hopes and aspirations hollowed out. Even the wealthy must endure crumbling and unsafe roads.

The failure of “trickle-down” economic policies must be recognized.

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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 orlando.delogu@maine.edu.