Remember 2009, when the Democrat-controlled Legislature passed a tax reform package that raised sales taxes in order to lower the income tax? I do, because I lost my legislative re-election campaign largely because I voted for it.

Fair enough — politicians are accountable for votes they have taken. It’s part of the process. My eventual opponent emerged after spending considerable time going door-to-door collecting signatures for the referendum that ultimately repealed the new tax reform law.

So I now watch with great interest as Gov. Paul LePage’s new tax reform package rolls out. The package aims to modernize the tax code, raise and broaden the sales tax, reduce income and corporate tax rates, “export” some of our tax burden to out-of-staters, and eliminate the estate tax. His ultimate stated goal is to boost Maine’s business climate dramatically.

In 2009, reform was spurred by Maine’s repeated ranking of highest overall tax burden by the Tax Foundation. This ranking became a rallying cry for cutting taxes in the State House, in media, and on the campaign trail. Never mind that the Tax Foundation admitted its methodology had flaws, revising the calculations and lowering Maine’s ranking retroactively. The label stuck.

The recession was also in full bloom in 2009. Maine’s dependence on taxation of such things as auto sales and construction materials caused big swings in revenues. Through tax reform, the Legislature hoped to reduce Maine’s high income tax burden while creating more revenue stability by taxing more services, reflecting more of Maine’s modern economy.

The proposal cut the income tax dramatically, closed tax loopholes, and expanded the sales tax to many services (and exported the tax burden). It cut the budget by $300 million to pay for it all. However, what was called the “Maine Miracle” by the Wall Street Journal hit the wall as soon as the details were made public.

Huge outcries over raising 102 new taxes were heard. There was great consternation about raising one kind of tax to lower another. Specific sales taxes were very unpopular. Tax credits to help low-income people with the new sales tax burden were considered cumbersome. “The sales tax is a small business and jobs killer. Maine needs lower overall taxes, not a gimmicky shift of one tax into another,” growled the Maine Heritage Policy Center.

Republicans mounted a signature campaign, voters defeated the tax plan soundly, and it was done. Another earnest attempt at tax reform by the bipartisan “Gang of 11” in 2013 got no further.

Well, watch out now because tax reform has returned to the State House and it’s on steroids. The LePage plan creates more than 200 new sales taxes and increases the rate. The income tax rate drops to 5.75 percent. Corporate income taxes will see a big cut. Itemized deductions are gone. Refundable credits are back on the table for low-income taxpayers.

The plan is big, it’s bold, and it’s really complicated.

I seldom agree with the governor, but I have to admire his audacious attempt to achieve what others in the past have failed to do — enact meaningful tax reform. It’s a bit like Nixon going to China. Perhaps it takes a Republican to move this state beyond the “all taxes are bad all of the time” rhetoric of Grover Norquist, with his anti-tax pledge.

Do I like all of it? By no means. This proposal embraces the ideology that lowering taxes on high earners and corporations will create more jobs and increase prosperity. Wisconsin, Ohio and North Carolina all recently cut income taxes, and their job growth lags behind the national rate. Kansas has huge budget shortfalls after cutting income and corporate taxes. Granted, economic growth may not flow immediately from these tax cuts, but deficits sure do.

Moreover, new sales taxes cover only about two-thirds of the hole in revenues created by slashing the income, corporate, and estate taxes. This creates large structural holes in future Maine budgets.

Many of the same politicians that pounded the Democrats for their “gimmicky” attempt in 2009 and responded limply to the bipartisan package in 2013 must now line up and salute the governor’s 2015 proposal, with its 200 new taxes, while Norquist’s pledge hovers above.

Additionally, fiscal conservatives will have to kick the can down the road by not fully paying for the income tax cuts. Even the U.S. Congress has a pay-as-you-go policy in place.

Finally, Democrats will have a hard time rejecting a package so similar to their own.

It’s going to be an interesting session.

Lisa Miller, of Somerville, is a former legislator who served on the Health and Human Services and Appropriations and Financial Affairs committees.


Only subscribers are eligible to post comments. Please subscribe or to participate in the conversation. Here’s why.

Use the form below to reset your password. When you've submitted your account email, we will send an email with a reset code.

filed under: