Maine Republicans Double Down on Tax Cut Fervor


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lepage-1.jpgThere have been lots of fireworks since the beginning of the year in Maine over tax policy, and they are unlikely to stop anytime soon. This week, the Maine Republican Party announced its intention to seek a ballot measure that would implement a flat 4 percent income tax, replacing the current graduated income tax structure. Their goal is to eventually eliminate the state income tax entirely.

If voters were to approve this ballot measure, the result would be a massive tax cut for the wealthiest Mainers and a steep reduction in the quality of critical public services that would undermine the state’s economy. The Institute on Taxation and Economic Policy (ITEP), estimates that shifting to a 4 percent flat income tax by 2021 would cost $600 million in state revenues – about half of all the state money spent on K-12 education according to the Maine Center of Economic Policy. ITEP also found that half of the tax cut would go to Mainers making more than $175,000 annually, with the top 1 percent of taxpayers receiving an average cut of over $21,000.

Meanwhile, the 20 percent of Maine taxpayers that make do with just an average of $23,000 a year would get a tax cut of only $14 (the vast majority of low-income Mainers would see no cut at all). The ballot measure doesn’t specify which budget cuts or tax increases will happen to make up the lost revenue, but one can be sure that any of the paltry tax cuts given to middle and working-class Maine families will be outweighed by higher sales and property taxes or cuts in public services. ITEP crunched the numbers- if all of the lost revenue was replaced with a higher sales tax, the average taxpayers the in bottom 80 percent would see a significant tax hike while the majority of the state’s wealthy taxpayers would still make out with sizeable tax cuts.

The most egregious part of the Maine Republicans’ push to lower income taxes that benefit the wealthy is that the plan would undo most of the good that came about from tax reform enacted in Maine this year. In a bipartisan compromise, Republican and Democratic legislators rebuked the governor’s initial proposed giveaway to the wealthy and instead cut income tax rates across the board while broadening the tax base. They also implemented or enhanced refundable tax credits for working families, doubled the homestead property tax exemption, cut estate taxes and increased the sales tax. The package had its flaws- mostly in that it is a small tax cut on net and shifted some responsibility for paying for state services away from the personal income tax and onto regressive sales taxes. However, it also made great strides in improving tax fairness and sustainability in the state. Now Republicans want to undo the hard work of the previous legislative session and put Maine on a worse path.

One can confirm that this recent push for a flat income tax is all about politics and not about the welfare of the state by looking at the other proposals included in this ballot initiative, which include draconian reforms to social services meant to punish the low-income residents who rely on them. Undocumented immigrants, felons convicted of drug crimes and the unemployed would be kept from getting any TANF or SNAP benefits, the amount of time citizens could collect benefits would be reduced, and all adult TANF beneficiaries would be subject to drug testing, a policy that has failed in many states. As Jesse Graham of the Maine People’s Alliance laments, Maine Republicans want "tax cuts that primarily benefit the wealthy and new attacks on poor people and immigrants." Apparently what they don’t want is responsible tax policies that would work for everyone, not just the privileged few. 

Thank you for visiting Tax Justice Blog. CTJ and ITEP staff will soon retire this domain. But ITEP staff are still blogging! You can find the same level of insight and analysis and select Tax Justice Blog archives at our new blog, http://www.justtaxesblog.org/

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