When Gov. Janet Mills took office in January, one of the pacts she made with legislative leaders was to not  “raise taxes” in her first biennial budget.

Not all the Democrats in the Legislature were happy about this. After the proposed, threatened and enacted tax cuts of the previous administration, state revenues were seriously depleted, declining by a full percentage point of the state economy — about $600 million, in current dollars.

A strong national economy — now in its 11th and possibly final year of expansion — allowed lawmakers to have their cake and eat it too, however. There were modest program expansions and partial restoration of local aid, including K-12 school funding and revenue sharing — without a general tax increase.

When the economy heads south, as it inevitably will, that happy combination will no longer be possible. In fact, we’ll be looking at tax increases and program cuts, since the state budget must be balanced.

So it’s a good idea to start setting priorities now, figuring out how to approach the next fiscal crisis. As it turns out, it wasn’t quite true that there are no tax increases in the new budget.

A tobacco tax increase, L.D. 1028, was passed with bipartisan majorities and signed into law. It increases the wholesale price target on which taxes are figured from 20% to 43%.

The purpose, as conveyed in the title, is to “prevent and reduce tobacco use” by “equalizing” rates on all tobacco products to match the $2 per pack cigarette tax — which was doubled during the Baldacci administration for the same purposes.

While raising taxes does initially deter use, the effect fades over time, so it’s the funding for tobacco cessation programs and rural hospitals on which anti-smoking advocates are pinning their hopes.

Good intentions aside, a tax is a tax. What’s different about this one? The amount to be raised, about $10 million annually, is not trivial; it will affect people’s wallets.

Yet this tax doesn’t rouse the ire of the Maine Heritage Policy Center, which — any time a nudging upward of income or corporate taxes is even suggested — goes into full-court opposition. It hasn’t mentioned the tobacco tax increase.

As to why, we can find a clue in the tax fights of 2013 and 2015, when “tax reform” was in the air. “Reform,” in this case, meant continued reductions in taxes on incomes of high earners, with cuts to property tax relief programs — yet the numbers still didn’t add up.

The Legislature also increased the sales tax from 5% to 5.5%, first temporarily, and then permanently. What tobacco and general sales taxes have in common is that they are both regressive, meaning they bear more heavily on lower-income taxpayers.

The tobacco tax is especially regressive because, as we know from looking around us every day, it’s primarily poor people who still smoke. Taxing them yields little protest.

How regressive have state and federal tax systems become? Over the past 40 years, there’s been a massive transfer of income from working people to big corporations and the wealthiest Americans.

Corporate profits have doubled, matched by transfers to the economic elite. Fully 10% of the national income represented by wages — the staggering sum of $2 trillion a year — has been redistributed upward.

And while the causes of such enormous economic shifts are indeed complex, the most important factor within our immediate control — tax rates, especially on the rich — have been falling ever since the Reagan tax cuts took hold in the 1980s.

This could never have happened without the support of both major parties, and while Republicans have enacted more tax cuts for the rich at every opportunity, Democrats have done almost nothing to turn things around when they hold power.

In Maine, the Baldacci administration prioritized cutting business taxes, producing a complex web of reimbursements, credits, incentives and exemptions that cost state and municipal budgets at least $250 million annually — without any measurable benefit to the state economy. The LePage administration focused on income taxes.

Income inequality, which has reached extremes never before seen in our history, has to be the leading issue of the 2020 election, even before health care.

We must ponder why cutting the top income tax rates and business taxes is our go-to strategy. At some point, the ability to pay has to come back into the picture.

No one likes to pay taxes, so it matters how we devise our system. Expecting those who can least afford to pay to bear more burdens, while relieving the burden for those who can most afford to pay, is ultimately a formula for disaster.

Douglas Rooks, a Maine editor, opinion writer and author for 34 years, has published books about George Mitchell and the Maine Democratic Party. He welcomes comment at: drooks@tds.net

Copy the Story Link

« Previous

Bill Nemitz: Sen. Collins, ever fearful of Trump, teeters on the tightrope

Next »

Gov. Mills: Aiding asylum seekers also helps Maine economy