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A Message to Augusta: Tax Reform Shouldn’t Be a Gimmick

Even though TABOR was defeated in November, it sent a strong message that a large constituency of Mainers are fed up with our high tax system. And it doesn’t comfort anyone to see that we are considered one of the most tax unfriendly states in the country by the media every year; especially given the fact that most other high tax states are more urban and have higher populations. Even the Brookings Institution report released last year called for tax relief; it didn’t go far enough I felt, but it indicated that Maine could be doing a better job in terms of its cost to residents and in exporting its tax burden to non-residents who come to enjoy what this state has to offer. With that, there have been a lot of ideas floating around Augusta on how to pay for budgets and lower the burden; here are my thoughts on some of these:

-Cigarette Tax: How many times can you go to the well with this one? Sooner of later the well is going to run dry and the next thing you know, there is going to be some other vice they are going to have to find. What’s going to be next? Pork rinds? I know the health advocates love this and smoking is unhealthy and a nasty habit. But this isn’t about public health, this is about tax reform. This one at least seems to be dead in the water. But this is an “easy out” type of tax.

-Real Estate Valuation Cap: Freezing real estate values until the property is sold isn’t a universal solution. And the cost will outweigh the benefit. Think about it. If you create a disincentive to move, it’s going to adversely affect the real estate services industry in Maine; reducing revenue and taxes. And why add another layer of disincentive for retiree’s, business and the skilled workers to come here? This isn’t tax relief, it’s a tax shift because they money is going to be taken from somewhere.

-TABOR: Well intentioned, destined for failure. The problem with these voter referendums is that they are so complex and provision laden that by the time they get to vote, they end up full of loopholes or provide lack of flexibility elsewhere. Even if TABOR won, the lawyers would have been poking so many holes in it that it would be as effective as Swiss cheese.

The problem with all of these ideas is that they are all gimmicks. They don’t provide universal tax relief to all. It’s just a shell game. If our state government really wants to provide tax relief, it’s much more simplistic but forces them to make hard choices. Choices they rather not make:

First: Cut spending. If we are going to ever have true tax relief, it’s going to start with Augusta running the state government more like a business than a subsidy vendor. The problem with that is with legislatures, the power they wield is the money that they can spend. And that power is difficult to give up.

Next: Simplistic tax relief measures. Instead of all of these silly, complicated and uneven tax relief proposals, keep it simple. Lower the highest marginal income tax rate or sales tax by 1%, or increase the tax brackets itself by $10,000, or have a real estate circuit breaker with a simple formula. Do something in plain language that anyone can figure out that doesn’t have thousands of provisions, loopholes or exceptions embedded within it.

In the end, there is a ray of hope that this approach may be beginning. This is in the form of Governor Baldacci’s proposal to consolidate our school districts to a regional system. Several others have made varying proposals as well on this issue. If you haven’t read the Brookings report (and if you haven’t, I don’t totally agree with everything, but it is worth the read) it does make a strong case that one of biggest cost problems is our localized control of our school systems and the redundancies can be eliminated by regionalizing. I think it’s a step in the right direction. Whether all the special interests will spin it around enough to kill it remains to be seen.

Taxes are a necessity, but we could be doing better. In the end, tax relief isn’t that difficult if you really want to accomplish it. It’s just going to take some leadership in Augusta to get it done.

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