In his State of the State address this week, Gov. Paul LePage set forth an ambitious plan to reform Maine’s tax code. Although the details of the governor’s proposal are controversial, LePage’s overall aims should not be.

LePage understands — correctly — that the states are in a sort of permanent competition with one another, trying to attract savvy entrepreneurs, industrious workers and free-spending travelers. States that attract new workers and new investment will see their economies grow over time, and those that don’t, won’t. Growth is vital, not only for workers and business owners, but for everyone. Wealthy and growing states have more resources to spend on infrastructure, on the environment and on the neediest; poor states struggle to fund basic needs.

People move from one state to another for many reasons, some of which are beyond the power of government to alter. Not many people are drawn to Maine by the prospect of seeing four feet of snow fall in a week, but the state government can’t do much about the weather.

That makes it all the more imperative for state government to do what it can to change the things that are within its power. And this is the key, big thing that LePage gets exactly right: He wants us to adopt pro-growth taxing and regulatory policies.

To that end, the governor proposes the abolition of the state estate tax, state corporate taxes, the state Alternative Minimum Tax and the eventual abolition of the state income tax. Lost revenues are to be made up by increasing consumption taxes and cutting state spending by eliminating revenue-sharing with municipalities. Because consumption taxes hit the poor harder than the rich, LePage would not levy sales taxes on some necessities and has proposed expanding property tax credits for families of average and modest means.

Such changes would change dramatically Maine’s place in the widely followed Tax Foundation state rankings, and LePage is right to aim for big leaps up the rankings, rather than for incremental changes that would be less evident to the people “from away” whose attention we are trying to attract.


Many have observed that LePage’s tax plan resembles in some key respects the reforms enacted by the Democratic-controlled state Legislature and the Baldacci administration in 2008 and subsequently repealed, by people’s veto — with substantial support from Republicans. While the Democrats will relish the prospect of using their partisan opponents’ old arguments against them now, the similarity between the two plans also suggests that should be room for a bipartisan agreement to cut everyone’s income taxes while raising some sales taxes.

LePage’s plan to cut state revenue sharing will be more controversial, and his proposal to subject large non-profits such as hospitals and private colleges (including my employer, Colby College) is more contentious still.

The fundamental flaw in the state revenue-sharing program (and the parallel grants of money from the federal government to the states) is that it creates an incentive to overspend, because the people doing the spending and taking credit for the results don’t have to raise the taxes to pay for what they spend. That’s a real problem, but just how large is difficult to assess because we don’t have good ways of directly measuring how efficiently our local governments provide services.

The benefit of revenue-sharing is that our larger towns and cities provide benefits to many people who don’t live in those municipalities and don’t pay taxes in them. People who live in Vassalboro and Sidney but work in Waterville or Augusta enjoy lower property tax rates, but benefit from the snow-cleared city roads and other services that the property taxpayers of Waterville and Augusta pay for.

Taxing large nonprofits might help some municipalities’ budgets, but the revenue gains would be uneven, because most towns don’t have large nonprofits to tax. Those that do likely will find, on closer scrutiny, that their large nonprofits yield far more in tangible benefits than local residents now realize — and that those benefits would be threatened by taxing the providers.

A better way of aligning taxing and spending would be to regionalize taxing and consolidate the provision of public services, although that idea may be even less popular than anything LePage has proposed.

Democrats and Republicans in the Legislature will have policy ideas of their own, as they should. But as they do their work, I hope they stay focused on the governor’s key insight: If we want Maine’s economy to grow faster, our state has to compete harder.

Joseph R. Reisert is associate professor of American constitutional law and chairman of the department of government at Colby College in Waterville.

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