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Rep. Gary Knight (R-Livermore Falls)
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For Immediate Release

Date: 10/11/12

Rep. Knight Op-Ed: Once more, straight talk on tax cuts

To the Lewiston Sun Journal

By Rep. Gary Knight

If you've ever seen the movie "Groundhog Day," you know how I feel. In the film, Bill Murray plays a TV weatherman who goes to Punxsutawney, Pa., to cover the Groundhog Day festivities and ends up trapped in a time warp where every day is Groundhog Day. I am reminded of that movie every time I open a newspaper these days, only to see yet another attack on me for the tax cut package that passed the Legislature last year.

Adding to the sense of dj vu is that the articles all sound alike, as if they were all written by the same person, repeating the same language and many of the same arguments that have been refuted before. Only the "authors" change.

The latest assault comes from state Sen. John Patrick, a Rumford Democrat. In his recent Advertiser column, Patrick goes after a bill called LD 849. Here is his take: "Democrats voted in 2011 for $200 million of tax cuts, but opposed the estimated $700 million of tax cuts proposed in LD 849 in 2012." He goes on to complain that because of LD 849, the state won't be able to pay its bills.

Here are some basic facts. The tax package enacted in 2011 as part of the state budget totals $150 million, not the amount Patrick cites. The plan really takes effect on Jan. 1, 2013, when lowered state income tax rates kick in.

For starters, about 70,000 low-income filers will be exempted from paying any income tax, thanks to the new zero percent bracket. Roughly 460,000 households with moderate and middle incomes will see cuts averaging about $340. For example, in 2013, a family of four electing the standard deduction will owe no income tax if their adjusted gross income is below $35,700, versus the current no-tax threshold of $21,000. Additionally, a family of four with an adjusted income of $50,000, using the standard deduction, will see an income tax cut of $300.

Overall, the tax changes favor those with lower to moderate incomes, providing a tax reduction of about 15 percent. For those at the top of the income scale, the cuts are approximately 8 percent.

LD 849 - the subject of Patrick's indignation - is an entirely different animal, and it is unlikely to reduce Maine's tax revenues for a decade or more. Indeed, it might never affect state revenues. Democrats understand this, but they are using it as a straw man to pound Republicans for giving "huge tax cuts to the rich." That's the phrase they seem to have taken up as a campaign motto, featuring it everywhere, including in TV commercials. Patrick reiterates the now-familiar claim that LD 849 will give the wealthiest Mainers a tax break of more than $21,000 a year, and then he adds, "while 136,000 lower income households will enjoy a tax cut of $1."

That's right. One dollar. Per year. I have no idea where he got that figure, and I serve as the House chair of the Taxation Committee.

LD 849 is a "trigger" bill. It alters the way surplus state revenue is dispersed. After all state obligations are met and all bills paid, surplus revenue is filtered through a series of funds called the "cascade." The last "catch bucket" in the cascade is the "income tax relief fund." Under LD 849 (now a law), surplus funds would gradually lower the state's income tax rates. And I do mean gradually, at nearly glacial speed.

According to Maine Revenue Services (MRS), in order to give "the rich" the $21,000 tax cut Patrick claims, state government would have to experience a surplus of $3 billion. Considering the entire state budget is $3 billion, this claim is ludicrous. Yet Patrick marches on undeterred, blaming LD 849 for all manner of problems, including reduced revenue sharing to municipalities. That's as logical as saying the Red Sox had a bad season because the Patriots cut their punter.

But while we're at it, let's look at revenue sharing. Any cuts to towns have nothing to do with tax changes. Municipal revenue sharing, in fact, actually went up this year. The big cuts occurred in fiscal years 2008, 2009 and 2010. Revenue sharing during those years dropped annually from $133 million in 2008 to $97 million in 2010. It bottomed out at $93 million in 2011, the last budget year of the Baldacci administration.

In 2012, by contrast, revenue sharing increased to $96.9 million, while in 2014 it is scheduled to reach $141 million. Republicans stopped the bleeding and, for the first time since 2008, increased money going to towns. The budget also appropriated an additional $63 million for public schools, which directly alleviated property tax pressure.

Someday soon, I hope, the attacks on a commonsense tax reduction package will cease, and as with Bill Murray in "Groundhog Day," life can get back to normal. ###

Jay Finegan
Maine House Republicans
Tel: (207) 287-1445