Good tax policy demands more than just raising enough money to meet the budget’s bottom line: It also matters where the money comes from.
In Augusta this year, we are seeing two starkly different approaches to tax policy that would have radically different impacts on the lives of the majority of Maine residents.
Gov. LePage kicked off the legislative session with a package of his greatest hits, led by a big tax cut for the state’s wealthiest, paid for with cutbacks of state aid to school districts, municipalities and homeowners. The governor continues to make the case that these kinds of policies would make the state more prosperous, even though six years of experience tells us otherwise.
A much different vision of tax relief has also been presented this year, and it’s one lawmakers should find a way to support. Instead of cutting income tax rates, the plan put together by Democratic lawmakers is focused on reducing property taxes through a package of policies that would relieve the pressure on school districts and municipal governments that has been driving steep increases in recent years.
This is not just a matter of digging into a different pocket of the same taxpayers to fund the government. These strategies would dictate who pays and what services are funded.
The governor’s proposal would move Maine toward a lower income tax, which he would pay for by cutting education, revenue sharing for communities and residential tax relief programs, which he recently described as “anti-business.”
The Democratic proposals start with fully funding K-12 education at the level required by state law. That would deliver $150 million in sales and income tax revenue that would not have to be raised at the local level from property owners.
They would go further with increasing the homestead exemption for primary residences from $20,000 of valuation to $30,000. They would also add $33 million to the property tax fairness credit, which helps people whose property tax exceeds 6 percent of their income, or whose rent exceeds 40 percent of their income.
And they propose adding to state revenue sharing, not eliminating it. Altogether, these policies would make for the biggest property tax cut in Maine history.
The differences between the two approaches could not be more clear. LePage’s plan would put money in the pockets of the top 1 percent, hoping that they would invest some of it locally. According to an analysis by the Maine Center for Economic Policy, LePage’s approach would give people who report more than $384,000 of taxable income a tax break of $22,665 a year. Meanwhile, everybody who earns less than $92,000 a year would see a tax hike.
The Democrats would put money into local schools, public safety and roads.
LePage’s regressive proposals would provide a lot of relief for a few, while making the majority pay considerably more. That’s not the right choice for Maine.
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