February 7, 2013

OUR OPINION: Delaying tax cuts would save funds for municipalities

At one point in his State of the State address, Gov. Paul LePage sounded as if he were ready to make a major policy about-face.

In speaking about raising taxes, the governor left his prepared remarks and said, "Let's not do it for political reasons. If we have to do it, let's do it for the right reasons."

As the speech went forward, it looked as if the tax-averse governor provided enough of the right reasons to have a serious conversation.

First, by LePage's own admission, there is nothing left to cut.

After four years of recessionary budget cutting, starting in the Baldacci administration, more than just the fat has been trimmed already.

"I take no pride in this budget," LePage said in reference to his plan for the state to keep $200 million in tax revenue that was supposed to be shared with cities and towns.

"But I will tell you this -- I have (only) two other options: I can cut welfare and I can cut education. Or I can cut revenue sharing."

The governor is partly right. Cutting education would be disastrous for a state that needs the best-prepared workforce it can develop in a world that's being transformed by technology.

And what LePage calls welfare includes all of the social programs many Maine children, elderly, disabled and veterans depend on to keep out of poverty.

The state, however, has other options beyond the ones the governor has outlined.

The last Legislature passed a huge tax cut, about $400 million over two years, which did not go into effect until January and has never been paid for. The size of the tax cut is roughly what cities and towns would lose without revenue sharing, the homestead exemption and other proposed program cuts.

Delaying those income tax cuts would not raise taxes. It would keep them at the 2012 rate.

These tax cuts have been touted as having broad benefits, but that is not the whole story. Taxpayers at the lower end of the income scale are getting a break, but nowhere near as much as they would lose if their rent or municipal property tax was increased to pay for the state withholding revenue sharing.

The trade off would be equally bad for low-income and middle-income Mainers who got a few hundred dollars more in their paychecks but lost their health insurance or aid for a disabled child. All so the people the governor calls "job creators" can get a tax cut they don't need.

LePage made a strong case, but it may not be the one he was trying to make. Lawmakers from both parties are going to need more revenue to balance this budget and taking it from municipalities is not the answer.

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