Income tax loss would cut services, raise property tax

Former Gov. LePage is running for governor and is again proposing to eliminate Maine’s income tax. His theory is that this will attract large businesses from other states. He claims on his website that our family incomes will grow as a result because we will pay less in taxes overall. Is this realistic, or just appeasement of devote LePage/Trump supporters?

Will the elimination of the income tax greatly increase most Mainers’ household incomes? To evaluate, compare how Maine families are doing financially to those in the eight states that do not currently have an income tax. These are Florida, Wyoming, South Dakota, Nevada, Texas, Alaska, Washington and Tennessee. From 2020 census data, analyzed by the Federal Reserve Bank of St. Louis, we learn that only residents from Washington and Alaska have significantly higher median household incomes. Maine household incomes substantially exceed those of households in Florida, Texas, and Tennessee; and are about the same as households in the remaining three states. A noticeable increase seems unlikely.

Unless draconian cuts in state services are part of LePage’s plan to make up for the loss of the 43% of state budget revenue from income taxes, what are the likely revenue sources that LePage and the Legislature will consider increasing to balance the budget? How states without an income tax fund state services gives us clues. Florida and Nevada rely primarily on sales taxes. Tennessee and South Dakota rely on a combination of sales taxes and high license fees. Texas, Wyoming, and Washington rely on sales taxes and property taxes.

The most likely outcome of LePage’s plan to eliminate the income tax will be a combination of severe cuts in state services, sales and excise tax increases, and significantly reducing the state’s share of K-12 education costs, thereby increasing municipal property taxes.

George Seel

Belgrade