June 18, 2009
by Rep. Josh Tardy
Your editorial of June 14 – “Legislature breaks through tax logjam” – merits a response. In praising the new tax plan passed on June 11, you write that Republicans in the House and Senate spent much of that week “griping that the tax reform bill was the wrong thing at the wrong time.”
It is true that Republicans had many problems with this bill. Only one Republican legislator out of 70 voted for it. Some 85,000 Maine families will have problems with it, too. According to Maine Revenue Services, that’s the number of tax losers under this Democratic scheme. They will experience an overall tax increase.
The bill that contains the plan, LD 1495, is entitled “An Act to Implement Tax Relief and Tax Reform.” The operative word is “relief.” The Democrats sold this plan as a way to lower taxes for all Mainers by reducing the income tax rate from 8.5 percent to 6.5 percent. I wonder how it would have fared if it were named “An Act to Increase Taxes for 85,000 Maine Families.” That’s just as accurate as the real title. There’s no tax relief for that group, and this “reform” will leave them worse off.
When it comes to major public policy, legislators should abide by the same Hippocratic Oath that physicians take: First, do no harm. It is unfortunate that after working on this plan for several years, the Democrats in the end concocted something that punishes a large segment of the population. Perhaps that’s why they pushed the final bill through under cover of darkness, in the waning hours of the legislative session, with no public hearing. The 33-page tome was dropped on legislators’ desks only minutes before the vote was ordered, before legislators even had time to read the summary, let alone the turgid fine print packed into the document. And as we all know, with legislation, the devil is in the details.
Your editorial is also right that we thought the timing was bad. This is the most revolutionary change to Maine’s revenue system in 40 years. We should not be making such a sweeping transformation in the midst of an epic economic downturn, when the economy is a fast-moving target. It is extremely difficult to forecast state revenues under the existing system. The last minute news that May revenues came in $21 million below projections forced legislators to “borrow” money from next year’s budget to fill the hole, creating a new budget problem. Predicting revenues will be much tougher under an unproven system that hinges on consumer behavior as Mainers confront a bewildering array of sales tax increases on all manner of activities and services, even party clowns.
We won’t know for some time how hard it will be to forecast state revenues; the new system won’t kick in fully until January 1, 2010. Meanwhile, Maine residents will be trying to calculate how this game of tax roulette will affect them personally.
According to Maine Revenue Services, some 31,000 families will pay more in income taxes. A family with a combined income of $100,000, with federal deductions of, say, $25,000, will lose big in the Maine scheme. A new “household credit” is part of the plan, but it is skewed for progressivity. It phases out as one’s income grows, eventually disappearing altogether.
Another 54,000 families will lose because the sales taxes they pay on a broader range of items will total more than their income tax cut. An estimated $25.7 million in new sales taxes will come from motor vehicle maintenance and repair. That’s going to be a tough blow to folks just trying to keep their old cars running during this recession. But the biggest hit will be a projected $37 million in new revenues from taxes on meals and lodging, where the rate is climbing from 7 percent to 8.5 percent. While the bill’s proponents argued that this tax would fall heavily on tourists, roughly 80 percent of restaurant customers here are Mainers.
The other big losers, of course, will be the thousands of small businesses, tradesmen, technicians, mechanics and countless others who will become tax collectors for the state, with all the accounting and paperwork hassles that entails.
On June 12, dozens of Democratic legislators jammed into the governor’s office to watch him sign this bill into law. When his signature inked the paper, a wild cheer erupted from the onlookers. There was something ominous about that.
Rep. Josh Tardy (R-Newport) is the House Republican leader
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