Maine’s income tax is way too high, and our economy is paying the price. Gov. Paul LePage has proposed a comprehensive tax reform plan that contains elements endorsed by both Democrats and Republicans, and the time for action is now.

The governor’s plan would reduce the income tax from 7.95 percent to 5.75 percent, boost property tax credits, eliminate the death tax and slash taxes on pensions. It would compensate for some of the lost revenue by broadening the sales tax base and giving rates a modest, 1 percent boost. The net effect would be a $300 million tax cut for Mainers.

Let me explain the problems with the status quo. Maine’s top income tax rate is the ninth highest in the nation, at 7.95 percent. But it might as well be the first. That’s because our highest state income tax bracket starts at just $20,900.

Of the eight states with a top rate higher than 7.95 percent, every one of them reserves the top rate for individuals making at least $68,000, and as much as $1 million, per year. The result? Everyone in Maine with an income of $21,000 or more is being taxed as if they were rich.

Meanwhile, Maine’s sales tax, at 5.5 percent, is well below average — 32nd in the nation. The sales tax is virtually the only tax paid by vacationers and visitors, so it doesn’t make sense to levy high income taxes on people who earn a living in Maine while keeping taxes to a minimum for those who visit.

Tourism is an especially large part of Maine’s economy, so it’s reasonable to let that strength work for us. Despite its similar size, Maine has 2-4 times the overnight leisure market share as Rhode Island and New Hampshire. Roughly 10 percent of our state’s GDP comes from tourism.

Furthermore, young people make up an outsized proportion of travelers to Maine, and people make decisions about where to live based on their travel experiences. Let’s give those young, middle-income families a reason to stay in Maine by making our income taxes less punitive.

The governor’s plan does a lot to make Maine more affordable for older people, as well. It exempts the first $35,000 of pension income from taxes and completely eliminates income taxes on military pensions. The military pension break is not just meant to help elderly veterans; it also would help draw middle-age veterans to Maine to begin their second careers.

For seniors, the governor’s plan doubles the Homestead Property Tax exemption, while tripling the Property Tax Fairness Credit for everybody who qualifies. Finally, it eliminates the death tax, letting family farms and businesses be passed down through generations tax free and ending an incentive for retirees to plant their resources in another state.

The plan would help businesses by moving Maine’s corporate tax ranking from a dismal 45th to a competitive 17th, making Maine more attractive to corporations looking to expand. For the small businesses already here or not yet conceived, the dramatically reduced personal income tax would reduce their bottom line.

The shift from taxes on earnings in favor of taxes on consumption is fundamentally more fair, more stable and more competitive than Maine’s outdated overreliance on a bloated income tax.

But just as important as the increased competitiveness Maine would gain with other states is the net benefit to the average Maine household. Let’s see what happens when you combine all the changes to sales, property and income taxes.

Two married teachers younger than 65 with one child and a combined $105,000 household income would see an extra $1,504 in their pockets each year, or $125 per month. That money, if saved, could pay for their child’s education at a public university one day.

A single widow, older than 65, with no dependents and an income of $20,500 per year would have an extra $283 in her pockets each year, making it that much easier to pay her property taxes or heat her home.

As one of the “Gang of 11” — five Democrats, five Republicans and one independent — who in 2013 proposed a similar plan to reduce Maine’s income tax and make our state more competitive, my biggest regret about my time in the Legislature was the failure of both parties to come together and reform Maine’s outdated tax code.

Lawmakers have and will continue to find fault with certain pieces of the governor’s plan, but if they fail to enact any meaningful tax reform this year, you, the taxpayer, should be very disappointed. There is no reason why Maine can’t do this once and for all.

Dennis L. Keschl, of Belgrade, served from 2010-14 in the Maine House of Representatives, a Republican member of the Appropriations Committee. He also is a former town manager and retired Air National Guard officer and state of Maine public administrator.


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