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July 23, 2009
In two recent replies to my July 1 comments on Maine’s new tax reform law, it became clear to me that the “big picture” of Maine’s recent tax reform law may still be poorly understood. The main result of this law is that nonresident visitors will chip in $57 million more for the roads, workforce, emergency response, and other services they enjoy while here, Maine residents will pay $57 million less.
Maine’s budget will neither increase nor decrease as a result – yet Mainers will have more money in their pockets and in their economy. Apart from energy efficiency, improving education, and reducing our ballooning national health care costs, it may be as near to an economic “no-brainer” as I’ll ever see.
For decades, nonresident have paid very little for the services they use while visiting. Tourists don’t pay income taxes, so the basic recommendation has been to reduce income taxes, and to pay for this by removing tax exemptions on various sales and services. After many decades of trying, and under the tremendous leadership of my Majority Leader, Rep. John Piotti, and the Legislature’s entire Taxation Committee, this Legislature has succeeded.
Reducing income taxes will help make Maine even more attractive for wealthy retirees and well-heeled business owners, adding to the allure of our quality of place and outstanding workforce. Rather than reside for six months minus a day in Maine, our current snowbirds will also be more likely to file and pay income taxes here in Maine. All this helps distribute our civic tax responsibilities more equitably, and not on those who can least afford it.
Over time, more money in Maine’s economy will also mean more jobs, and higher incomes.
Until now, our state has been taken for granted. Tourists to Maine don’t check our latest meals and lodging tax when planning their trip, and if they did, they’d know we had among the lowest hospitality taxes in New England and of all destination states– and still will under the new plan. Likewise, they’d see that Maine has taxed only 25 of 180 sales and services commonly taxed in other states.
Instead, we’ve paid for our schools and roads through our own income taxes.
In regard to the income tax changes in the new law, the idea that itemized deductions have gone away is simply untrue. Those who repeat that myth are either doing so willfully or have not done their research. Only 25 percent of Maine families itemize, and for them there is a new itemized credit that builds off their federal itemized deductions, allowing them to still reap tax savings from mortgage interest, property taxes and other popular deductions. The credits are the key to reducing the tax burden for Mainers, providing a greater benefit to most folks than the old deduction system and the reason that for almost ALL Mainers with an Adjusted Gross Income below $25,500 will see a tax decrease, and most Mainer’s of all income categories (87 percent) will see a drop. And as with the current tax system, ALL social security benefits are exempt.
Benefits like the “Circuit Breaker” property tax and rent refund, which I have worked hard to promote locally as a means to help those with more property valuation than they can afford to keep, will also be made available on the form itself, increasing participation in these valuable programs for seniors and low income people.
In sum, Mainers in every tax bracket will emerge as winners.
It is too bad that a handful of politicians want to collect signatures to undo this good work, but I know they will not succeed as the big picture of tax reform is understood. Already, the reform has been heartily endorsed by almost every major paper in the state, several chambers of commerce, and national observers such as the Wall Street Journal, who hailed it as the “Maine Miracle.” LD 1495 is a sensible, long-overdue step to move Maine toward greater prosperity.
Rep. Seth Berry (D-Bowdoinham) represents Bowdoin, Bowdoinham, Richmond and Swan Island in the Maine House of Representatives, and serves as the House Majority Whip.