Policy Wonk: The LePage budget: Same old, same old

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Gov. Paul LePage is consistent if he is anything; he ran and won office on a tax-cutting, eliminate-the-income-tax platform.

With the aid of a Republican-controlled Legislature, he pushed through major tax reductions (primarily benefiting the wealthy) in his first two years in office.

These cuts did not pull Maine out of the deep recession we were in. They did reduce state revenues, beginning a long decline in welfare, highway, other infrastructure; K-12 education, and university spending. Alarm bells were ringing, however, resulting in a Legislature no longer controlled by the governor.

Undaunted, in each of the next two budget cycles he pushed for further income and estate tax cuts that would only be partially offset by broadening and slightly increasing the sales tax.

He pushed to eliminate or cut revenue sharing, to reduce property tax relief (homestead and circuit breaker) programs, and to shift jail spending to the local level of government. This raised already high local property tax burdens and moved us from broader, more equitable state taxes to a more regressive tax mix.

The governor didn’t get all he wanted in these two budget cycles, but the compromises struck with a more resistant Legislature nonetheless nibbled away at state revenues that, coupled with the lingering recession, continued to decline.

This required further spending cuts to essential programs serving children in poverty, the poor, the elderly, handicapped individuals, etc. All of this was done in the name of job growth, stimulating the economy, putting money in the hands of job creators.

But Maine’s economy (though benefiting from the national recovery) continues to languish. Paper mills and old factories close, but the governor is resistant to new energy technologies like wind and solar. He resists major infrastructure repairs and improvements to bridges, roads, and the energy grid system.

Those activities create jobs with a high multiplier effect. But LePage is not having it. It’s 2017: a new budget cycle, and he again calls for cutting the top rate of, and eventually eliminating, the income tax. Along the way he’d settle for a flat income tax.

He proposes further cuts to the estate tax. He again would partially offset the revenue losses by slight increases in, and broadening, the sales tax. He would further offset the revenue loss by reducing the eligibility of thousands of Mainers for welfare benefits.

He certainly knows these proposals run counter to the recently passed citizens’ initiative raising the top rate for high income people to more adequately fund K-12 education. But he’s prepared to ignore the citizen vote; he says they didn’t know what they were doing. He’s relying on a divided Legislature to again give him something by way of compromise that will further his long-term tax-cutting agenda.

It’s madness. The governor refuses to accept overwhelming evidence that tax cutting does not create jobs. At the national level two Bush tax cuts did not ward off, or facilitate recovery from, the recent recession.

At the state level data provided by the Center on Budget and Policy Priorities (looking at three different periods, the 1990s, early 2000s, and 2010 to the present) indicates that 16 states (including Maine) have pursued active income tax-cutting strategies in the name of jobs and economic growth – and it hasn’t worked.

In 12 of the 16 states job growth lagged national job growth after these cuts were enacted. Personal income growth did not keep up with inflation; one state (New Jersey) that cut income taxes in the 90s fully offset the revenue loss by raising taxes in the early 2000s in order to meet demands for services.

Three states (New Mexico, Oklahoma and Ohio) are seeing job gains not because they cut taxes, but because “fracking” opened up whole new economic and job opportunities.

The remaining states are experiencing various levels of infrastructure decline, reduced school budgets, and unmet social service needs as state revenues decline. Kansas and Louisiana are the current poster-children for how bad it can get. Maine is not far behind.

In sum, tax cuts do not create jobs. The Legislature needs to reject the current LePage budget in favor of tax and spending policies that more fully meet the needs of Maine people.

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 orlandodelogu@maine.rr.com.

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