Tuesday, June 18, 2013
Gov. Paul LePage has proposed keeping $200 million to fund the state budget rather than distribute it to cities and towns in an effort to balance the budget.
Combined with cuts to other programs, including the business equipment sales tax rebate and a cap on general assistance, the governor's budget would force municipalities to come up with $400 million in new revenues to maintain services.
Since every lawmaker in the House and Senate represents at least one municipal government and many property taxpayers, this is a proposal that's probably not going anywhere. It makes the case, however, that even LePage acknowledges that current revenues are not sufficient to run state and local government, and it's not surprising that lawmakers are looking at other ways to raise revenue.
One idea comes from Republican state Sen. Tom Saviello of Wilton, who is proposing canceling the proposed income tax rate cut that just went into effect for people with more than $250,000 per year in earned income.
Saviello says the idea came to him after knocking on doors during his last campaign. "They just couldn't understand why somebody making more than $250,000 of income couldn't be taxed more."
While that question is hard to answer, the net gain in revenue from Saviello's plan would bring in only $5 million per year or slightly more than half the $9 million in extra tax burden that the property taxpayers of Portland would have to pick up if LePage's budget was adopted.
It's pretty bad when $5 million is not a lot of money, but that's where we are in Maine today.
Clearly, the state's budget problems will not get fixed without some combination of budget cuts and revenue increases, whether it's the income and sales taxes that fund the state budget or the property taxes that pay for municipal services. A comprehensive approach that balances the revenue sources fairly would be the best way to achieve that goal.
Sen. Dick Woodbury, an independent from Yarmouth, has suggested an overhaul of the Maine tax system that lowers the income tax (which is paid by residents) but increases the share of taxes paid by visitors to the state, out-of-state second-home owners and the "six-months-and-a-day" nonresidents. All these people use state services but do not pay income tax.
Woodbury's approach would not only modernize the state's tax system but it also would reduce the incentive for high wage earners to declare their residency elsewhere to avoid Maine income taxes.
The governor has opened the door to tax reform with his tax-shift proposal. Now it's time for the Legislature to come up with a better way to share the burden.