The income tax gets a lot of attention. It even has its own day, April 15 — the day federal tax returns are due, and when many Americans are still scrambling to file (especially in Maine and Massachusetts, where the Patriots’ Day holiday often gives us extra time).
It’s also the time of year when publications put out their state-by-state rankings of tax burden, invariably with Maine near the top of the list.
But the timing of those reports shouldn’t leave the impression that it’s the income tax that makes Maine’s burden so high. But Maine’s tax burden isn’t so simple.
One of those reports, from WalletHub, said Maine has the third-highest tax burden of any state, trailing only New York and Hawaii. It gets there largely based on the property tax burden, which is fifth-highest nationwide, as compared to income tax burden (15th) and sales and excise tax burden (25th).
The overall tax burden shows that Maine is a relatively poor state with challenges related to its geography; it’s spread out and sparsely populated, making it difficult to deliver services efficiently, and many communities are isolated from the national economy.
It also shows that Maine is a generous state that wants to protect its less fortunate and support its schools and communities.
That last part has been made more difficult in recent years through policies advanced by former Gov. Paul LePage, who pushed for income tax cuts with the ultimate plan to eliminate it altogether.
LePage didn’t succeed in erasing the income tax, but he did lower it. Most of the benefits went to the most well-off Mainers, leaving the state with $860 million less in revenue than it would have had – and with a less fair system of taxation.
Sure, lower earners who already paid little in income tax also received a cut. But they are also the Mainers who already pay a higher percentage of their income in sales tax, and who are hurt the most when state revenue cuts inevitably cause property taxes to rise.
To pay for the tax cuts, LePage and the Legislature cut revenue sharing, which by statute should send 5 percent of state income and sales tax back to municipalities, down to 2 percent. Multiple Legislatures and governors have also failed to meet the state’s requirement of funding 55 percent of education costs.
That may lower state spending, but it makes running schools and local governments increasingly difficult. Communities suffer as they are forced to choose between properly funding schools and avoiding property tax increases – and it’s Maine’s poorest communities who suffer the most.
The first budget proposal from Gov. Janet Mills makes some progress, getting to 3 percent revenue sharing and nearly 52 percent of education costs in the budget’s second year.
But reaching the mandated thresholds for revenue sharing and education should be automatic – it should be the starting point for any budget, and left untouched through negotiations.
Maine could stand to make its income tax system more progressive. Sales taxes could be reformed too to make them more fair.
But the most immediate way to help Maine’s tax burden is to fully fund education costs and revenue sharing. When figuring out the budget over the next couple of months, the Legislature should start there.
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