We’re on the doorstep of another state budget shortfall – $570 million. (Using “Grand Canyon” to describe this gap is appropriate in this circumstance.) Though the Legislature and governor have announced “drastic cuts,” too many years of smoke and mirror cuts have finally caught up with the big spenders.
Back in the 123rd Legislature, I had the pleasure of serving on the Taxation Committee. We spent the entire first year of the session working on tax reform. The premise: expand the sales tax to goods and services not currently taxed, use the increase in sales tax to cut in the income tax, make the taxes “exportable” and the whole process would be “revenue neutral.” Sound logical?
I thought it was, but something was missing – spending reform! Spending reform and a Constitutional amendment to require a two-thirds supermajority to raise or lower taxes were needed. Should we have trusted the Legislature to keep its word in regards to increasing sales taxes in the present, and “phase in” the income tax cut in the future?
Just a little refresher about taxes and the Legislature. Remember the “temporary” sales tax increase in 1991? The state and country now finds itself in a familiar situation to then. The budget woes of that time shut down the government from May 10, 1991 to May 24, 1991. The compromise to help close the budget gap was increasing the sales tax from 5 percent to 6 percent. The language in the legislation had a “trigger” provision to cut the sales tax by a half-percent when the states revenues reached an 8 percent increase in a one-year period.
The first year the sales tax rolled back was 1998, when the rate went from 6 percent to 5.5 percent. The remaining half-percent was reduced the following year. After that roll back to the original 5 percent, the Legislature changed the language that would have triggered subsequent decreases by law. That is why we, the Republicans, had demanded the Constitutional amendment in first, then do the tax reform.
One Legislature is not bound by another, so why should we trust the proposed decrease in income taxes actually would happen? In this current economy do you think the income tax decrease would have happened as it was scheduled? Not very likely – the excuse would be, “We can’t afford it right now!”
Democrats told us they would not support the two-thirds supermajority because “it would have boxed the government in” should we get into a position that required raising taxes. This was the fatal mistake and deal-breaker with the conservatives in the Legislature.
The second excuse put forth by the Democrats was the Taxation Committee doesn’t control of the spending side of the equation. The inside joke was “We are the senders (the Taxation Committee) and they are the spenders (the Appropriations Committee).”
Another issue was the enormous cost to small business. Ninety-two percent of all Maine business is small business; it is the engine of Maine’s economy. These small businesses that do not currently charge sales tax would be forced to become tax collectors for the state, at an average cost of approximately $6,100. This is just one more cost and regulation forced upon the entrepreneurs and risk takers.
Now let’s fast-forward to the current legislation. Again, they want to increase sales taxes with the promise of decreasing the income tax. The only difference between last session’s legislation and this session’s legislation are the items to tax. There is no magic bullet to restore our fiscal sanity, but here are some measures we can take instead to bring positive change and much needed relief.
• Remove single persons earning less than $13,500, or couples earning less than $26,000, from the tax rolls;
• Lower the top marginal rate from 8.5 percent to 4.5 percent for income earners $250,000 and less;
• Place a moratorium on all regulations for building or expanding business for five years, to encourage their expansion and help create a positive environment and bring jobs to Maine.
• Bring all government spending in the top two categories – Department Health and Human Services and Department of Education – to the national average. Currently, these departments consume about 80 percent of the budget! David Flanagan and the Maine Public Spending Research Group determined Maine could cut over $700 million by bringing our spending to the national average.
That is the beginning, but there is much more that can be done. The Legislature needs to stop thinking in two year increments, length of their term, but instead formulate a two, five and ten year long term plan.
Spending reform and tax relief is the key, however. Tax reform alone is just another way to get more revenue.
If you don’t send it, they can’t spend it!
Scott Lansley is chairman of the Androscoggin County Republican Committee, a former legislator and current selectman in Sabattus. E-mail: lansley2@gmail.com.
Send questions/comments to the editors.
