Republican radio address
For the weekend of April 4-5, 2009

Greetings, this is Josh Tardy, leader of Republicans in the Maine House.

One of the biggest events in the State House this week was a public hearing on a tax reform bill proposed by the Democrats. As expected, the hearing turned out a huge number of Maine residents to speak for or against the bill. I’ll get into the details in a minute, but in a nutshell the bill seeks to eliminate all income tax brackets and impose a flat rate of 6.5 percent.

Republicans have long advocated reducing our 8.5 percent income tax top rate, because we understand that an income tax that high discourages business investment and entrepreneurship. Lower business investment translates directly to our shortage of good jobs and good careers. Without a strong and prosperous employment base, too many of our young people leave Maine and put their education to use someplace else.

Any bill that promises to reduce income taxes deserves a second look, regardless of which party comes up with the idea. But as we looked into the details, we realized this is not a bill that Republicans can support. We have it on good authority that Governor John Baldacci is not exactly keen on this proposal, either. And we know that the business community is overwhelmingly opposed. A survey of more than 1,000 small business owners in Maine by the National Federation of Independent Business found that more than 80 percent of them turn thumbs down on this legislation.

The problem is simple to understand. The author of the bill, Representative John Piotti, claims that it will lower income tax collections by $160 million per year. But the bill also would increase taxes by $160 million by extending the sales tax to cover services supplied by thousands of Maine companies. In legislative lingo, the tax is revenue neutral. It’s not a tax reduction at all, but instead a lift-and-shift technique that taxes things that Maine has never taxed before. A lot of things. Meanwhile, the Democrats have brought forth an array of other bills that raise taxes and fees, including a tax on home heating oil and a license fee for kayaks and canoes.

One of our major concerns is the timing of this tax reform. The finances of Maine government are in a state of wild flux. The upcoming two-year budget is now working its way through the Legislature. It faces a structural deficit of more than $800 million, and now we’re told that the deficit could go well past $1 billion. We won’t know the final numbers until late this month, but a snapshot this week by the Consensus Economic Forecasting Commission was very disturbing. The situation is too chaotic to embark on major tax surgery. When we can’t even predict how much revenue the state will bring in next year under our current system, imagine the difficulty of making that prediction under a new, untested system. The rule of unintended consequences would come into play. Doctors take the Hippocratic Oath that states, “Above all, do no harm.” Legislators should take the same oath. Attempting to transform our tax system during a time of intense economic turmoil is asking for trouble. It’s like trying to change the propeller on your boat during a hurricane.

Let me describe some of the tax changes under this so-called reform plan. The meals and lodging tax would jump from 7 percent to 8.5 percent. That’s a tough blow to restaurants and innkeepers already battered by the recession. The bill also would impose a sales tax on long-distance phone calls and jack up the real estate transfer tax on houses priced over $500,000.

The reform also levies taxes on installation, repair and maintenance of all kinds of everyday items – office equipment, lawn and garden equipment, appliances, musical instruments, shoes, jewelry and firearms. The big one in this category is repair and maintenance of vehicles. In a poor state like Maine, where the average car is seven or eight years old, drivers are trying to keep their vehicles going as long as possible. Car repairs are costly, and body work is even worse. The last thing cash-strapped Mainers need is a sales tax on top of those big bills. And by the way, if you have to have your car towed into a garage, the towing is taxed, too.

Entertainment and recreation services would be taxed – movies, concerts, sporting events, water parks, racetracks, historic sites, carnivals and even petting zoos. Sports and games also would take a tax hit – golf greens fees, ski lift tickets, bowling alleys, pool halls, tennis courts, swimming pools, gyms and go-cart courses.

Whitewater rafting and guided recreation would be taxed, along with all kinds of scenic and sightseeing excursions, such as by aircraft, helicopter, balloon, watercraft, railroad, bus and wagon.

Your parties and kids’ birthday celebrations would come under the tax edict. We’d have sales taxes on bands, disk jockeys, comedians, clowns, jugglers and other entertainers. My favorite one in this category is ventriloquists.

I could go on and on – dry cleaning, diaper services, interior decoration, boat mooring and moving services. The problem with every one of these tax targets is that they would turn thousands of small business people into tax collectors for the state, complete with all the accounting headaches and hassles that would come with more complicated bookkeeping and tax reporting. We’re already notorious as a state that is unfriendly to business, and this tax expansion would harden that sad reputation.

There are better ways to reduce our income taxes than throwing a tax net over the whole state. A Republican plan moving through the Legislature would take surplus revenues and use them to gradually lower our top rate to 4.5 percent. We’ll be promoting that plan more heavily in the coming weeks, but for now think of it this way. If we can put gas taxes on automatic pilot going up, we can put income taxes on automatic pilot going down.

This is Josh Tardy. Thank you for listening.