October 12, 2012

LePage says improved tax rank only beginning

BY MAL LEARY

AUGUSTA -- Gov. Paul LePage says the improvement in Maine's business tax climate as measured by the Tax Foundation is only the beginning and he will propose further tax cuts, including the elimination of the corporate income tax to spur job growth in the state.

"We are moving in the right direction and I am pleased to see it," he said in an interview. "In my mind, it's so far away from where we need to be, it's really symbolic."

LePage said he wants to be in the middle of the pack when it comes to the overall tax burden.

The Tax Foundation released its State Business Tax Climate Index this week moving Maine from 37 in the nation to 30. But, LePage said, overall Maine's tax burden is ninth highest among the states and that has to be lowered for the state to compete with what he calls the prosperous states.

"I think the state of Maine should have no corporate tax at all and that the United States of America should be around 20 percent, then we could compete world-wide," he said.

LePage said it is a global marketplace and Maine needs the federal government to adopt tax policies that encourage growth and that state changes are not enough. He said the Tax Foundation ranking next year should improve again with the further tax reductions, which take effect Jan. 1.

The report said that Maine had the most sizable rank improvement this year because of a repeal of the alternative minimum tax and a change in treatment of net operating losses.

The index compares all of the states in five areas of taxation that have an impact on business: corporate taxes, individual income taxes, sales taxes, unemployment insurance taxes and taxes on property, including residential and commercial property.

"In the corporate income tax code, a temporary ban on net operating loss carry forwards expired, returning Maine to the widely used standard of allowing such carry forwards for up to 20 years," the report said.

LePage said he made it clear when he proposed the tax changes after his election that they were only a beginning. He said he is looking at several tax cut proposals as part of the two-year budget he will submit in January, but has not decided which reductions to propose.

"They (Maine Revenue Services) are giving me a whole lot of different proposals, what-ifs," he said. "We are looking to see how they all would fit into the bigger picture."

The bigger picture is the new zero-based budgeting process that is still under way and what savings it may yield. Another issue is the structural budget gap of $756 million the state is facing and how LePage proposes to resolve that.

The governor's promise of further tax cut proposals and elimination of the corporate income tax brought a sharp response from Rep. Seth Berry, D-Bowdoinham, the lead Democrat on the Taxation Committee.

"The direction that the governor is taking our tax code in takes money out of the pockets of the middle class and that is my great concern and that of most Democrats," he said.

Berry said for the state to see its economy grow, the incomes of the middle class need to increase. He said the focus of any tax reductions should be on the middle class, not corporations and the wealthy.

Rep. Gary Knight, R-Livermore Falls, the co-chairman of the Tax Committee, said the governor is on the right track to propose further tax reductions. He said the challenge will be how to pay for any of the tax reductions in a sluggish economy.

"I am hopeful in the next two years we can come out with a package that Mainers can accept," he said. "I am an optimist; I think we can find something that works by working across the aisle with both parties."

As in the tax cut package that was passed during the current session, there will have to be compromises and a realization that all the goals may not be achievable in a single legislative session, Knight said.

"To really claim that I was successful as a governor is to leave this office having Maine's taxes at 25th in the nation," LePage said.

 

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