Let’s hear it for Republican Gov. Paul LePage’s new tax-reform plan.
It’s “another government bailout for the wealthy.”
“It’s terrible public policy that gives liberals another way to take money from the working class.”
“[T]his dangerous bill … expand[s] the sales tax to scores of new categories and thousands of small businesses.”
Uh oh, it doesn’t look like Democrats are going to embrace LePage’s idea of reducing or eliminating the state income tax and replacing the lost revenue with an expanded sales tax.
Except those quotes aren’t from Democrats.
The first one is from a 2010 television spot by the Maine Association of Realtors attacking a plan backed mostly by Democrats to cut the income tax and expand the sales tax.
The second one is from then-GOP state chairman Charlie Webster to the Kennebec Journal about why he was organizing a referendum to repeal the Dems’ tax shift proposal.
The third one came from an op-ed by then-Republican state Rep. Jonathan McKane of Newcastle urging voters to veto the changes.
To be fair, it’s unlikely LePage’s take on taxes will exactly mirror the Democrats’ failed plan. In fact, the governor doesn’t appear to have settled many of the details of his legislation, even in his own mind.
In 2013, he told a conference on economic development, “The fact that we have an income tax at all is a massive disadvantage.”
In his 2014, State of the State address to the Legislature, he seemed to backtrack a little from that position: “We must lower our income tax rates and eliminate the estate tax to bring Maine’s tax system into the 21st century.”
LePage appeared to have forgotten that a bipartisan group of legislators called the “Gang of 11” had proposed doing just that the year before, planning to pay for those changes by expanding the sales tax. At the time, the governor called that idea a “bad deal.”
Now, LePage appears to be undergoing a metamorphosis. After winning re-election earlier this month, he first told reporters he wanted to sharply reduce the income tax. Then, in an interview with WCSH-TV, he said, “We need to rethink income tax totally. I think there’s room to eliminate personal income tax. We have to do that if we have any expectation of being able to compete with big states.”
That sounds like a great idea – until you run the numbers.
Maine’s income tax generates more than $1.3 billion each year. To produce anything close to that kind of cash from the sales tax, it would have to be expanded to cover virtually every retail transaction. That means you’d be paying an extra 5 percent (the tax is scheduled to revert to that level from 5.5 percent later this year) on food, medical care, heating fuel and a host of other essential purchases.
The advantage of such a universal sales tax is it would produce a stable flow of revenue. Unlike the current narrow tax, which is heavily dependent on car sales and building construction supplies, a sales tax on everything could weather recessions, avoiding huge shortfalls in the state budget.
The disadvantage of expanding the sales tax – as the Democrats found out to their regret in 2010 – is the public won’t stand for it. Not only did voters repeal the plan by a sizeable margin that June, but they also took revenge on the party that backed the idea, giving the GOP control of both chambers of the Legislature that November.
Anybody feeling brave?
In theory, there ought to be plenty of common ground among LePage and his Republican allies, Democrats, and centrist supporters of the old Gang of 11 plan. They’re all on record as favoring reducing the income tax. They just disagree about how much. They all support broadening the sales tax. They don’t quite see eye to eye as to how far. They all want credit for passing real tax reform. They just don’t want the blame once the public discovers that reform really means some stuff that wasn’t taxed before will be now.
In reality, there’s no political benefit for anyone to compromise on tax reform.
LePage wants to play to his base by advocating big cuts, even though he has to know there’s no painless way to pay for them. Democrats have already been burned once on this issue. They aren’t interested in leading the charge again, but they aren’t opposed to making a counter proposal they know the governor won’t accept. And the old Gang of 11 crowd has less clout now than it did in 2013, so its efforts to resolve differences between the other clowns can easily be disregarded.
In the 1970s, Republicans were all in favor of shifting the state’s tax burden from the income tax to the sales tax. Democrats were solidly opposed. By the 1990s, the two sides had traded positions for no apparent reason, other than it allowed them to continue to disagree with each other. Now, we seem to be in the midst of another shift designed to produce just what both sides really want.
Let’s hear it for the status quo.
If we taxed my patience, we’d balance the budget in no time. Do your part by emailing me at aldiamon@herniahill.net.
(yawn) Realize that we all live in a State where a family of four can qualify for public assistance and still be in the highest tax bracket. Nobody wants to address the spending side of the ledger or where monies are allocated. (but politics IS patronage after all).
Here’s a novel idea, reduce the income tax by the amount that could be save by reducing duplicate departments and agencies at the state level that waste probably a billion dollars every year.
I tried figuring out the states budget about five years ago. A lot of the information available on the state website was still not explaining where all our tax dollars go. Every department had money ear marked for grants, I mean every department. May not be the same today but it was a very convoluted mass of info that seemed to be designed give the appearance of beiing transparent while not really being so.
The DOT was the most troubling. Again about five years ago, they had over a billion dollar budget, only approximately $20 million of it was destined for road repair and new construction. Of course I understand those state road jobs have a lot of shovels, which translates into a lot of people that are assigned to hold them up and watch the one person that is actually working on any of these given job sites. I think that’s a union requirement.
So in short, instead of looking of where to shift where the taxes come from, look at tax savings and I think most every one (except state employees) would support such moves.
As a former member of the “gang of 11” who met with governor a couple times on this issue. I can say he never outright opposed the concept. He was concerned the with “revenue neutral” aspect of the bill, which I remember being the first words out of his mouth when members of the “gang” met with him. He has at time proposed other tax reform ideas. We do desperately need tax reform at the state and national levels it will be interesting as a bystander to watch what is proposed and the hurdles it will face. I can say any sales tax expansion brings out all the groups and their lobbyist to defend their sacred ground.