Maine craziness

Republican prevalence is all too common in what should be a blue state

Deep Blade Journal is more of a world events blog. But the insanity of the recent legislative session here in Maine forces me to write about it.

Even though Democrats control both houses of the legislature and the governor's office, Republican policy objections and allergy to taxes can carry the day. Usually, it is the Democrats that shoot themselves in the foot by proposing something complicated and insane that nobody can understand. This year, it was a $450 million ``revenue bonding'' package that included a sell off of future lottery revenues for cash this year.

The Republicans actually had a good point that, ``The worst thing we can do in these cash-short times is to borrow $447 million on a 16-year bond (without public approval), spend the money and suffer annual payments of $44 million for many years to come.''

Of course, the Republican idea was to play it for maximum political effect by starting a referendum drive for ``people's veto'' of the budget. Now, that's crazy, putting the budget out to referendum. But the strategy worked. The Democrats caved last week (Rs ended the signature drive), issuing a new budget with an across-the-board $125 million cut and a $1 add-on to the cigarette tax. Months of work on the budget were thrown out in seconds just to get somewhere they probably should have started with in the first place.

Tax reform?
In the midst of all this, state progressives in the form of something called Taxpayers for a Fair Budget (part of a coalition known as The Maine Citizen Leadership Fund) has developed a sweeping tax reform proposal. Here is the information given in this press release about what the plan would include:

• An expansion of the circuit breaker program, providing greater property tax reductions for those who need it most

• Fully funding the Homestead exemption, providing property tax reductions for all Maine residents

• Doubling the low income tax credit, and raises the personal exemption and standard deduction, providing income tax reductions for Maine’s low- and middle-income families

• Taking 50,000 low income families off the income tax rolls

But here is the kicker, not mentioned in the press release -- the plan would in the form of LD 1587, as reported by the Central Maine Morning Sentinal, ``reduce the top income tax rate from 8.5 percent to 8.25 percent''.

Hold on there! Tax cuts for the rich? What have Maine ``progressives'' become? Baby Bushies? At this point, I had an email exchange with a friend who has put a lot of good effort into movement building over the last few months, working to create a powerful progressive caucus in the Democratic party. I should not have been so contrary, I suppose, especially given that he has been right there all along in the tough game of politics, while I have not devoted the time recently...

Anyway, here are our exchanges on the tax theme, starting with my friend's initial email promoting the plan. Because the message said ``please pass this on'', I sent my reply to my Deep Blade Correspondents list. A bit lazy of me not to take out the non-Maine names, but some of you may I hope have found this interesting anyway:

Date: 17 Jun 2005 15:34 -0400 From: Scott Subject: Support tax reform bill from Taxation Committee

Scott Note: forwarded message attached. Please Pass This On!

Over the next 24 hours, the Maine State Legislature will vote on a historic tax reform bill which takes a bold step toward tax fairness in Maine.

This bill significantly lowers property taxes and income taxes for Mainers and is paid for by closing sales tax loopholes. This bill will put our tax system into balance for the first time in many years and will lead to long term stability for our state budget.

Call your State Representative at 1-800-423-2900 Call your State Senator at 1-800-423-6900 Call the Governor at 287-3531

Ask them to support the Taxation Committee's tax reform package, LD 1595!

A few calls can REALLY make a difference!

If you need help finding out who your legislators are, go to http://www.maine.gov/portal/government/edemocracy/lookup_officials.php

The Taxation Committee's reform bill includes:
...[same as listed above]...

The bottom line is, it provides broad-based income and property tax reductions for Maine residents- substantially for those who need it most- and it pays for this tax reform by eliminating sales tax loopholes that benefit mostly higher income residents and out-of-staters.

People have said with their voice and vote that they want the state to pay for tax reform responsibly, rejecting the false choice of either borrowing the money or damaging the safety net. This is a critical time in this debate and the opportunity exists to take a giant leap forward for tax fairness in Maine. We are asking you to call your legislators and the Governor to urge them to support the taxation committee's reform package because we need fair taxes now.

It is time to pass a responsible budget and real tax reform in Augusta. It appears we are at the moment of truth for both.

But legislators and the Governor need to hear from you!

Date: 18 Jun 2005 18:56 -0400 From: Eric Subject: support (now moot) tax reform bill from Taxation Committee?

Wait a sec, Scott. Is it true that this bill reduces the top income tax rate from 8.5 percent to 8.25? Personally, I do not support this package, despite some purportedly good things it does. Unless the tax cut for the rich is eliminated, or even changed so that a new, HIGHER, top rate is added for very-high-income people, I'm not going along. But decrease of the middle and bottom income rates, would be fine.

Top-rate income tax increase, NOT sales tax expansion, is the way to go to catch money from the wealthy. The sales tax provision included would cause all sorts of dissension across all income levels as services are taxed. Did you see the barber shop featured on Channel 2 News yesterday? They were downright ugly in there and were not about to think this thing through, not ever. That's the problem with these Democrat plans -- they hurt the wrong people in favor of sweetening the pot for the Republicans and the rich. The Democrats end up in a place where no one is listening to their arguments, even if some of them are good ones.

Property tax cuts should not be across the board either. Some formula for assessing coastal vacation palaces much, much higher property tax rates would be welcome. Let's get creative. Massive rates could be assessed in areas where such palaces are going up, while exempting the first 1/2 million dollars or so.

Now I see the whole thing is moot as the bill has gone back to committee. As for what they are going to do, I ask, do people really smoke enough to keep government afloat at a buck a pack?

Eric

Date: 18 Jun 2005 23:45 -0400 From: Scott Subject: support (now moot) tax reform bill from Taxation Committee?

Hey, Eric,

Thanks for your comments, essentially the same ones I made a couple of months ago to some of the progressive lobbyists when some of these things were first talked about. They said that, even with broadening the sales tax base, or raising the sales tax, and even with lowering the top rate (I guess deemed politically expedient to get the more enlightened parts, though they were not for it; our own bill would have raised it to 10%), lower income people would be better off, because the other provisions like increased earned income tax credit, percentage cap on property taxes, raising the income tax brackets, diminished cuts to services, etc., more than offset what would otherwise appear to be regressive tax policy. More comment interspersed below.

Wait a sec, Scott. Is it true that this bill reduces the top income tax rate from 8.5 percent to 8.25? Personally, I do not support this package, despite some purportedly good things it does. ... The Democrats end up in a place where no one is listening to their arguments, even if some of them are good ones.

I think this is an excellent point, and one that I have brought up with our lobbyists and coalition partners. (Taxpayers for a Fair Budget is the coalition, of which the Maine Progressive Caucus is a member.) Sometimes I'm not sure that everyone appreciates the "political" effect, such as you cite in your example above. Our experts say that Maine has one of the narrowist tax bases in the country. I beleive them, but that doesn't mean necessarily that we should follow everyone else.

I've been working with the Maine Citizen Leadership Fund people and Kit St. John from the Me Center for Economic Policy for the past year, and they really seem to know their business. I am always raising your kinds of questions, but they are able to point out the whole picture, and demonstrate how something that is on the face of it regressive can be subverted by other provisions of a bill, and actually come up with an overall positive result. And often it is just part of "selling" something to get the necessary support. Of course, the Gov and some of the Dem leadership have come up with some things that has us pulling their hair out.

Property tax cuts should not be across the board either. ... thing is moot as the bill has gone back to committee....

I would actually like to see a temporary penny sales tax increase called the "McKernan" tax, as long as the regressive effect would be offset by other preferential provisions for lower income people. And course, much of the budget cuts effect lower income people too. I think that would be more politically plausible across the parties, and also across classes than the cigarette tax increase. Right now the shortfall stands at 250m, which ironically is the amount that the state must commit to education, because of the 55% for ed referendum that passed last year, and supported by groups like the Me Municipal Assn, which of course is not being helpful to solve the budget problems. It seems a bit crazy to vote in something that doesn't say specifically how it will be paid for. The coalition's bill is L.D. 1587. Some of the highlights are in the press release, which can be seen at www.mainecitizen.org, specifically at http://mainecitizen.org/pressreleases/tax/tfb2005proposal.htm. If there is another coalition meeting in the next week or so, would you like to go with me? Thanks for you interest in this issue. I appreciate any further feedback you have. It is very helpful.

Scott

-----

There is some more email, but I won't include it here. All I will say is that I'm very uncomfortable signing up to support this because I'm told it has been wonked to be what is in the realm of the ``possible''. And they were not proud enough of the plan to specify the included tax cut for the rich. That seems crazy to me, as it seems to not even have existed anywhere, except in the realm of the wonks, until it just dropped into the news a week ago. No one has even tried to build support for progressive taxation, and recapture for the state of revenues Bush gave away to the rich. Partly, this is because Governor Baldacci has tried to out-Republican the Republicans on his no-tax pledge. This has been stupid. It's put the state in a box where a lot of little people are going to be hurt.