Friday, July 17, 2009

The Professor on LD 1495 "Tax Reform"

The following item appeared on the op-ed page of the Times Record today, but was not posted on their web page. It was written by John Frary, a retired History Professor and past challenger to Mike Michaud for the District 2 seat in Congress.

Since I know the author, I asked him to provide the essay for reading by a broader audience, and he has complied.




In 2006 the liberal Brookings Institution published a report welcomed by Gov. Baldacci as a "blueprint for Maine’s future." Charting Maine’s Future argued that the state’s top income tax rates constitute a drag on economic development and that its "threshold", i.e., taxing incomes over $18,000 at the top marginal rate of 8.5%, was too high. It recommended lowering the top rate and raising the threshold. The report also proposed that the sales tax be broadened to stabilize the revenue flow.

Brookings did not, however, explicitly argue for funding income tax cuts by sales tax increases. It proposed instead that the legislature find the money by establishing a Government Efficiency Commission of "twelve independent minded citizens" to identify administrative economies.

LD 1495, the Democratic majority’s "tax reform" lowers the top rate but no efficiency commission has ever been established. The cuts are to be funded by sales tax increases. Curious about the lack of interest in efficiency. I traveled down to Boothbay on Jun e 29 to hear a presentation by Representatives W. Bruce MacDonald (D-Boothbay), Elspeth Flemmings (D-Bar Harbor) and Thom Watson (D-Bath). As it turned out the subject of efficiency, inefficiency, and savings had no place in their discussion.

Rep. Watson’s statement of his agenda in A Citizen’s Guide to the 124th Maine Legislature includes "culling out business tax incentives that are not producing as promised" but the subject of culling never came up in Boothbay Town Hall. Indeed, none of the representatives have anything to say about spending reform in their statements in the Guide. Apart from the vague talk of culling, their respective statements speak only of novel ways to spend money.

After listening to Representatives Flemmings and Watson boasting about the new budget’s $500 million in cuts I feel prompted to paraphrase a remark once made by Samuel Johnson: "A Democrat cutting taxes is like a dog’s walking. It is not done well, but you are surprised to find it done at all." Although these cuts included some desirable structural changes, they relied mostly on huge one-time infusions of federal funds. Shoving burdens down the line to the municipalities, hence onto the property owners, also helped. Never mind that Charting Maine’s Future was very critical of our state’s high property taxes.

Optimists reckon that the shortfall in the next budget will be $500 million, pessimists reckon $1.520billion. Faced with the choice of further cutting or more "revenue enhancement," I expect the Democratic majority’s mind will turn to tax increases, just as the compass needle turns to the north and the heliotropic flower turns to the sun. A great deal of history supports this prophecy and little contradicts it.

The conviction that LD 1495 is not so much a reform as a tax shift, and a platform to launch increases in the future, is the impetus behind the Republican drive for a people’s veto of the bill. This belief is not exclusive to Republicans. This weekend I spoke with Rep. Stephen Hanley (D-Gardiner, Randolph), who voted against it. He believes that income tax cuts and broadening of the sales tax, coupled with a rate reduction, are necessary but holds the position that LD 1495 is an evasion of responsibility; that spending reduction is the prerequisites to real reform.

Rep. MacDonald began the presentation by explaining the budget’s appropriations, emphasizing that welfare and education accounted for most of the money spent and that these expenditures were the mark of a civilized society. I took this to mean either that he felt sums spent on these programs could never be wasted, or alternatively, that wasting was the civilized thing to do.

Reps. Flemmings and Watson took on the task of explaining the benefits and mechanics of LD 1495. It was a hard sell. The standing room only crowd was polite but the20questions were all skeptical or critical. The explainers insisted that 87% of Mainers can look forward to a tax decrease. Members of the audience seemed to suspect that they would end up among the 13%. The representatives struggled to explain the legislation’s intricacies. The audience remained obstinately baffled. The representatives spoke reassuringly of the Maine Revenue Services’s esoteric calculations. The audience remained unconvinced. Perhaps they were remembering the state’s record on budget projections


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  2. Sorry, this comment belongs to the next column.