Tax Reform? You Decide!

by Rep. David Burns

In the early morning hours of June 13th, the Legislature finished up a very difficult and busy session dealing with serious budget shortfalls, a worsening economy and nearly 1,500 bills. As a freshman legislator, I enjoyed the process and my fellow members. I learned much and experienced some very frustrating times, none more frustrating than what occurred June 11th, when the Legislature passed one of the most radical tax overhauls in 40 years. More specifically, the Legislature’s Democrats passed it, because in the House not a single Republican voted for it. The next day Governor Baldacci signed the bill into law.

Now a drive to repeal this flawed law is under way in hopes of killing it before it would take effect, on January 1st. An enormous grassroots effort has sprung up around the state to gather signatures for a people’s veto petition. The Democrats claim that this is nothing more than “some partisan operatives,” but even the Green Party is now committed to repealing this law due to its damaging effects on the poorest Mainers.

Last year, another big Democratic tax increase on beer, wine and soft drinks was easily defeated by a people’s veto. The plan this year is for a repeat performance, to get another referendum on the ballot next June so that people have the final say on whether they want a massive expansion of the sales tax. If the required number of signatures is gathered, the law would be suspended pending the outcome of a referendum next June.

It’s unfortunate when Maine voters have to keep fixing the damage done by the Legislature, but at least we have the constitutional right to do it. And in this case, we would be negligent if we allowed such a bad law to remain on the books. A coalition called Still Fed Up With Taxes initiated the petition drive to collect the 55,000-plus signatures needed. If they succeed, voters will have a choice. If they fail, this regressive and expensive tax will become the law of the land; and the money raised from taxing working people will be used to support more government programs.

Some of my Republican colleagues sat on the Taxation Committee and watched this legislation evolve for months. The basic idea is to lower Maine’s top income tax rate of 8.5 percent to 6.5 percent and pay for the lost revenue with an expansion of the 5 percent sales tax to a vast new array of services and activities. It also would “export” $55 million to tourists by jacking up the meals and lodging tax to 8.5 percent. Mainers will pay the higher meals and lodging tax, too, which will likely have an adverse effect on our restaurants and motels.

In theory, the tax shift would be revenue neutral; the state would take in the same amount of money. And also in theory, the plan would treat taxpayers equally; what they paid out in additional taxes would be cancelled out by the income tax cut. That goal of taxpayer equality is already out the window. According to an analysis by the Maine Revenue Services, some 85,000 Maine families will be losers in the new tax system that resembles a game of tax roulette.

Republicans opposed this plan because it really hammers older Mainers living on fixed incomes. A couple surviving on Social Security pays little, if any, income tax; so they won’t get the benefit from the income tax reduction. However, they will face a sales tax on a huge number of services, such as car repairs, movies and even house cleaning. If they decide to move to Florida to escape Maine winters and taxes, the state will hit them on their way out the door by taxing moving services. I would rather keep those retirees here as long as they choose to live in their home state.

Newspapers are now running letters to the editor from older Mainers who have figured out how this new system will affect them. They will be among the losers in a tax overhaul so complicated that most legislators probably don’t even understand it, especially the ones that voted for it. Why else would Democrats approve a plan that punishes older Mainers so severely, especially Mainers who have lived here for most of their lives and paid the state’s high taxes throughout their careers? Now that they are entering their golden years of retirement, along comes the Legislature to get their money one last time.

Low-income Mainers of all ages will take a hit. Maine’s income tax brackets range from 2 percent to 8.5 percent. Under this plan, all brackets will be eliminated and a 6.5 percent rate will apply to everyone. Maine residents will lose their income tax deductions for mortgage interest, property taxes, medical expenses and charitable contributions. The plan also eliminates the standard deduction. Maine’s progressive tax system would be replaced by a complex scheme of household credits that may or may not work as the authors envisioned. We do know that the credits will phase out as one’s income rises.

It’s also disturbing that the final plan seems to have been changed by politically connected insiders and special interests to remove taxes on activities enjoyed mostly by affluent residents. The first plan passed by Democrats in early June included sales taxes on golf greens fees and ski lift tickets. The governor refused to sign that bill and came back a week later with a revised version, LD 1495. The tax on greens fees and lift tickets was gone, but the tax on miniature golf remained. So golfers on the real courses are protected, but not so for the kids playing mini-golf. The governor also wiped out the increased property transfer taxes on houses selling for more than $500,000.

The Democrats always claim to stand for the little guy. In this case, ironically, they stood proudly for the affluent while throwing the working poor under the bus. It’s too bad more deserving services didn’t have the same kind of lobbying muscle as the golf and ski industries. The governor didn’t eliminate taxes on diaper services or car repairs. He left in the taxes on the repair of shoes and clothing, on rug cleaning and car washes; and the list goes on and on for other basic services used by hundreds of thousands of Maine residents.

This so-called tax reform plan never should have passed. This tax-and-spend spree has been going on for nearly 40 years here in Maine. Now that more citizens are discovering the damage it does, they are becoming engaged. We can only hope that the repeal provision gets on the ballot and the voters will veto yet another monstrosity to come from the State House.

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