Phil: Did you feel that rumble?
Ethan: No.
Phil: It was like an earthquake. The ground shook.
Ethan: I missed it. When did it happen?
Phil: On Tuesday when the governor proposed eliminating the biggest job-crushing, out-migration-creating, wealth-killing law in Maine.
Ethan: He proposed repealing NAFTA?
Phil: No, he proposed a constitutional amendment to eliminate the income tax.
Ethan: Oh, you mean he hoisted upon Mainers the biggest education-crushing, infrastructure-destroying, property tax-raising break for the wealthy in Maine history.
Phil: Please tell me, how will Maine ever make progress if we can’t believe in Mainers and the momentum that could build if the Legislature made the transformational and courageous decision to eradicate the income tax? This could be the one of the most important things we do to improve our economy. Look at all the states in our country with no income tax and see how much better they are doing.
Ethan: I don’t have to look all across our country. I simply have to look at New Hampshire. Unlike every other New England state, they have no income tax and yet their unemployment rate is higher than Vermont’s, their household income is below Connecticut’s and more people are moving to Maine from New Hampshire than vice-versa. Clearly you cannot equate “no income tax” to “economic prosperity.”
Phil: I don’t equate the two, but when you add in the work ethic and ingenuity of Mainers, eliminating the income tax would have a tremendous impact on entrepreneurs and job creators. It says, “Come to Maine, pay our people well and we’ll create a hospitable environment where you can succeed.”
Ethan: Well, I agree with the “tremendous impact” part of that statement. Unfortunately, the tremendous impact I see is the punch in the gut when school funding gets wiped out, health care for thousands gets eliminated and businesses start leaving Maine when we can no longer afford to invest in our infrastructure.
Phil: You do understand that I know government will need to replace most of the revenue lost from the income tax, don’t you?
Ethan: Well, that does make me feel a little better. Some of your folks seem to be in favor of simply eliminating the tax without ensuring that all the services we depend on continue (or simply not caring what other tax will have to be jacked up).
Phil: To pay for the income tax elimination, I agree with Gov. Paul LePage that we must simultaneously raise the sales and use tax. Wouldn’t it be nice if we had all of those “under the table” cash transactions actually become taxable on the consumer side? Furthermore, sweep the fund balances of all the state budget fiefdoms into the general fund and take a look at all of the “dedicated revenues” in the state budget and decide whether they are more important than, say, mental health and elderly issues?
Ethan: Where are these dollars hiding?
Phil: Right in front of your nose. Take a whiff when you pick up your electric or cable bill, for example, and notice all the fine-print fees. Flip through the annual report of the dozens of quasi-government entities and look at their fund balances. In fact, look in almost every department and you will find, collectively, big money quietly flowing into Augusta. The Legislature has not scrutinized these funds for decades to determine if the taxes/fees should end or be reallocated.
Ethan: First of all, I dispute that they haven’t been looked at in decades. They are looked at every budget cycle by committees of jurisdiction and then appropriations. I know my committees did, and lord knows our current governor must have scrutinized what you reference. Second of all, all those fees combined don’t come close to the $1.5 billion a year needed to replace the income tax. Lump all those fees together and dump them 100 percent toward this proposal, and you’d still have to almost double the sales tax to make up the income tax loss.
Phil: Well, I will double dispute you that they are examined closely, and I expect they are worth a lot more than you think. That said, I am not arguing that they will cover the balance, merely that there is more money flowing through the halls of Augusta than many will ever admit.
Ethan: Regardless of your vision for a tax-free Maine, what are the odds you give of the governor’s proposal passing?
Phil: As you know, a constitutional amendment requires a two-thirds vote of both the Maine Senate and House, plus a vote at the ballot box. While I think the public vote would be a convincing “Yes,” our Legislature may be challenged, shall I say, to see the greater good that would result.
Ethan: I agree that he won’t get two-thirds in the Legislature. Probably won’t even get a majority. But I think it would also lose at the ballot box. As we have seen with the governor’s current proposal, the fear of property taxes rising outweighs almost everything else. And the campaign to stop the income tax elimination would be all about property taxes rising.
Phil: Yes, and the “sky is falling” predictions of services lost, as they did when they killed TABOR, TABOR II and “Palesky” (the 2004 property tax cap referendum). Then, over time, taxes and spending kept rising.
Ethan: So since we both agree this thing is going down, why do you think the governor has proposed it?
Phil: C’mon. Have you ever known this governor to care whether legislators will support what he considers to be the right thing?
Ethan: He does enjoy dying on that hill.
Phil: Rest assured, he ain’t dead.
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