The Portland Press Herald’s editorial page editor, Greg Kesich, is a man of many ideas, a lot of them good ones. But in a Feb. 17 column, he essentially suggests that if Republicans would simply get out of the way, Maine government could fund basically all its needs by a modest increase in the income-tax rate for high earners. He implicitly criticizes Gov. Mills for not seeking such an increase in her first budget. I respectfully disagree.
First, just slightly raising income-tax rates wouldn’t allow us to fund all we might want or need the government to do. Having sat for years on the Legislature’s Appropriations Committee, I can tell you that worthwhile unfunded projects and programs are almost limitless in their cost implications. In a perfect world, we all might surely agree to spend more on our universities, public schools, community colleges, roads and bridges, rural broadband, health care, workforce training, increased teacher salaries, student debt relief – the list could go on and on.
In large part, then, the issue boils down to this: How much are we willing to tax ourselves, and what are the priorities within that limited resource amount? Reasonable people have widely different views on that subject. I often found myself advocating for more spending than many of my Republican colleagues during my time in the Legislature. That didn’t make me a good person or, for that matter, a bad person.
For myself, I would be willing to pay more in income taxes to help fund government services in our state – others may disagree. “The perfect level of taxation” is in the eyes of the beholder. But that decision can’t be made in a vacuum.
As Maine attempts to attract capital investment in people and businesses, we must remember that we compete for that investment against 49 other states and, increasingly, foreign countries as well. Even with the Paul LePage-generated reductions in our top rates (supported almost unanimously by Democrats at the time, by the way), Maine still has one of the highest marginal income-tax rates in the United States. Whether we are attempting to attract a new business or a new family doctor to Maine, we can’t be blind to that.
Think back to two recent progressive efforts to raise marginal rates on high earners: one to fund increased education spending and the other to provide free home health services. Ask any business recruiter, hospital administrator or CPA how the environment reacted just to the possibility that might happen – just the specter of making us the highest-taxed state in the country at certain income levels hurt recruitment efforts and caused many high-income Mainers to explore establishing residency elsewhere. We certainly have magnificent natural resources, but I hear the hiking is pretty good in Tennessee, too.
So, what can we do? From my perspective, we spend too much time on the subject of “how much to tax” and not enough time about “how to tax.” As many smart people have noted, we have a tax system based upon a 19th-century manufacturing economy rather than the largely service-based economy that we’ve become. Instead of fighting over whether to raise or lower our income-tax rate, let’s shift the discussion to how we can export more of our tax burden to nonresidents of Maine.
One thing Gov. LePage got right was his advocacy for decreasing Maine’s income tax and paying for it by increasing and broadening our sales, meals and lodging taxes. Let’s not forget we are Vacationland. The millions of annual visitors from away could be leaving more of their money in Maine as they buy our products, stay in our hotels and eat in our restaurants. We could actually increase our gross tax revenue while decreasing the amount paid by Mainers.
This is not a new idea and there is political peril in proposing it – see Democrats circa 2009 – but it may be time to revisit the conversation. Gov. LePage lacked the ability to collaborate and compromise to get this done, but perhaps those skills exist in the new administration.
But in the meantime, let us reject the notion that we can afford everything we want if mean-spirited fiscal conservatives would just get out of the way.
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