Republican weekly radio address

For the weekend of July 25-26, 2009

Greetings, this is Jonathan McKane, state representative from Newcastle.

Last November, Maine voters went to the polls and repealed a new tax on beer, wine and doctors’ bills. The majority party in the Legislature had passed the tax over the objection of Republicans, and it wasn’t long before a grass roots tax revolt was sweeping the state. A coalition called Fed Up With Taxes collected more than 55,000 signatures to put the people’s veto referendum on the ballot. They prevailed by a landslide margin of nearly two-to-one.

This year, another coalition called Still Fed Up With Taxes is battling to repeal yet another bad idea from Augusta. It’s a sad state of affairs when Mainers have to keep fixing the damage done by the Legislature. On June 11, shortly before adjournment, the majority party passed a bill that radically transforms Maine’s tax system. It’s the biggest change since the state income tax began in 1969. Just as they did with the tax on beer and wine a year ago, the Democrats wrote up the final bill behind closed doors, with no public hearings and no public scrutiny. Legislators were not even given time to read the document – 33 pages of dense, turgid legalese. In the House, every Republican voted against it.

The proponents had good reason to conceal the details of their plan. They boasted that it would lower the top income tax rate, but they played down the mind-boggling assortment of new sales taxes that will further burden Maine people. Small businesses, in particular, will be hurt. They will have to charge the taxes, collect them and send them to the state with supporting documentation. Many service providers will become first-time tax collectors for the state.

And they never mentioned that the income tax cuts will go mostly to Mainers making over $330,000 at the expense of the working class and the poorest residents. That’s why advocates for the most vulnerable Mainers don’t like this plan.

While the Democrats constantly asserted that the plan would lower the top income tax rate from 8.5 percent to 6.5 percent, they never told us that at least 75 percent of taxpayers now pay an effective tax rate that’s less than 4 percent. The new law abolishes all progressive tax brackets and sets one rate of 6.5 percent.

They never told us they would eliminate itemized deductions for things like mortgage interest, medical expenses, property taxes and charitable contributions and replace them with something called a household credit. Many taxpayers with large, itemized deductions will be losers under the system. But the law also eliminates the standard deduction and personal exemption for taxpayers who do not itemize. It’s important to note that the household credit begins to phase out at an income of $55,000 for a married couple and half that for a single person. Maine Revenue Services now admits that at least 85,000 families will have to pay more taxes than they pay now. I suspect the number is considerably more.

It was never explained how the plan would suspend until 2014 the indexing of the income tax to compensate for inflation. The suspension of indexing will increase our taxes by millions of dollars. In tax policy, the devil really is in the details.

Finally, they never bothered to tell us that the plan may be challenged as unconstitutional – as a violation of the Commerce Clause. Under the new law, the State of Maine will not extend the household credit to people who live in other states but work in Maine and pay Maine taxes on the money they make in Maine. You cannot establish a tax system that interferes with interstate commerce by favoring one group of taxpayers over another group. What a fine mess we’d be in if the law takes effect and is then struck down by the courts.

It’s no wonder that the coalition Still Fed Up With Taxes has gotten off to a strong start. Countless Maine businesses and individuals are engaged in the campaign to collect at least 55,000 valid signatures by September 11. The coalition has more than 5,000 petitions now circulating throughout the state. By meeting the deadline, the people’s veto would go on the ballot next June. The Secretary of State would have until sometime in October to certify the petitions. And here’s a key point. Once they are certified, the new tax law cannot go into effect on schedule, on January 1st. It would be stayed pending the outcome of the June vote. If the voters veto the law, it will vanish forever. If they uphold the law, it would take effect in 2011.

Unfortunately for the Democratic proponents, the more voters learn about this law, the worse it looks. I don’t doubt that they started out with the best of intentions. Our tax rates are too high. But somewhere along the way, this plan went off the rails. It is bad for the people of Maine and needs to be repealed.

This is Jonathan McKane. Thank you very much for listening.

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