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For Immediate Release

Date: 01/22/14

Public Hearing on Dem Tax Hike Proposal Reveals Economic Costs

Maine manufacturers to Dems: Stop attacking foundation of Maine's economy

AUGUSTA - The Maine Legislature's Appropriations and Financial Affairs Committee on Wednesday held a public hearing on LR 2721, a Democratic proposal to eliminate business tax incentives and raid the state's rainy day fund in order to fill a $40 million hole in the state budget. Without this measure, the budget gap would automatically be filled with a cut to state revenue sharing funds to municipalities.

Bill Cohen of Verso Paper, which operates mills in Bucksport and Jay, asked lawmakers, "Has the Maine Legislature abandoned Maine manufacturing?" He added: "At what point will government stop attacking the very foundation of the Maine economy?"

David Barber, formerly of Barber Foods in Portland, told the committee that his former plant is now one of 10 owned by a Cincinnati company. The plant's competitiveness with those in other states and its ability to continue to pump $21 million in payroll funds into Portland's economy, said Barber, is largely reliant on the Business Equipment Tax Reimbursement (BETR) and Business Equipment Tax Exemption (BETE) program.

Commissioner Sawin Millett of the Department of Administrative and Financial Services (DAFS) additionally warned against the Democratic measure's $36 million raid of the state's "rainy day" fund. He said Moody's and S&P bond rating agencies both warned in May of last year that Maine's budget reserves are low and that further depletion could result in a drop of the state's credit rating.

Republican lawmakers emphasized that the most important task of policymakers today is to foster economic growth and job creation in Maine.

"This proposal is a job-killer that ignores the elephant in the room, which is runaway Medicaid spending," said Rep. Kathleen Chase, the ranking House Republican on the Appropriations Committee. "It's a massive blow to Maine's private sector economy that could mean many Mainers losing their jobs just as they're getting back on their feet."

"The needs of state and local government must be balanced with the needs of private sector workers and Maine businesses," said Republican appropriator Rep. Tom Winsor of Norway. "We heard lots of testimony from town managers trying to protect their budgets, but the people I'm most concerned about are the ones who are hard at work right now in a mill or a food processing plant. Without a strong economy, we're not going to have sufficient budgets to argue about."

"The Democrats said they were going to find big, corporate tax breaks that aren't used anymore, but they couldn't find them and this is what we're left with," said House Republican Leader Ken Fredette of Newport. "Local government has outgrown state government by over 50 percent in recent years. With a modest reduction in revenue sharing, local governments would be forced to be more accountable to their constituents for their overspending, and so they're predictably resistant."

Fredette added that voters in the Kennebunk-based RSU 21 yesterday overwhelmingly rejected a $75 million bond for school spending, and that the vote was an indication that local taxpayers reject overspending in all areas of government, including municipal government.

BACKGROUND:

The original task of filling the $40 million hole was left to the Tax Review Task Force established by the last biennial budget. That group, stacked by the majority with liberals, couldn't find enough "corporate welfare" and instead went on a consumer taxing spree, proposing twice their mandate—$82 million—in tax hikes on everything from cable TV to haircuts to student loans and vending machines.

Meanwhile, Democrats ignored last summer's budget agreement requiring the Office of Policy and Management (OPM) to find $34 million in spending cuts. They summarily rejected all of the spending cut proposals that they themselves asked OPM to find.

Local government has grown far faster than state government in recent years by more than 50 percent. From the BDN: "Property taxes rose 74.3 percent between 1998 and 2011, compared with a 50.6 percent jump in spending from the state's general fund, which was nearly $2.86 billion in 2011." . . . Revenue sharing remained fairly stable during that time.

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Contact:
David Sorensen
Maine House Republicans
Tel: (207) 205-7793