LePage Budget Aims To Liberate Mainers From State Income Tax

Bold. Transformational. Controversial.

Fill in the blank with your own adjective to describe Gov. Paul LePage’s budget proposal to fund the operations of state government for the next two-year budget cycle that begins on July 1. Over the next four and a half months, Maine people will have the opportunity to participate in the debate, discussion, and public hearings that will take place before we vote on the biennial budget.

Gov. LePage is proposing to reduce and eventually eliminate the state income tax, and shift Maine’s tax burden to services, consumption, and tourists. The rationale for moving from income to consumption is entirely reasonable: our current tax code was written back in the days when Maine had tens of thousands of high-wage jobs. Think about it. In 1960 Millinocket had the highest per capita income in the entire state. The Great Northern mills employed over 4,000 people well into the mid-1990s. From Medway to Lincoln to Old Town to Bucksport, the entire Penobscot Valley was blessed with good-paying jobs that supported Maine families and generated plenty of income tax revenue to state government.

As recently as the late 1990s, the Passadumkeag and Costigan stud mills employed more than 250 hourly employees from this area. Those mill jobs in turn generated at least three times as many jobs outside the mills, from loggers to truckers to diesel mechanics, and supported scores of mom-and-pop stores and restaurants in our rural communities.

Sadly, those days are gone, and so is the tax revenue generated by all those jobs. If we really want to restore prosperity in Maine, we can’t rely on an antiquated tax code, and in particular we can’t continue to pound Maine workers and retirees with one of the highest state incomes taxes in the country. When you look at the legislative history here in Maine, you will begin to understand why.

Enacted in 1969, Maine’s state income tax was pegged at a modest top rate of 6% on income over $50,000. Adjusted for inflation over the past 46 years, that’s the equivalent of about $150 grand of annual income today. In any case, it was enacted as an emergency measure to fund a 37 percent increase in spending over the previous biennial state budget. That’s right, a staggering 37 percent increase in state spending, to cover welfare and Medicaid expansion (sound familiar?), increased retirement benefits for state employees, and the creation of several new state bureaucracies.

Putting this in perspective, the total state budget for the 1969-70 biennium was just $335 million. Today the budget is well over $6 billion with a “B”. To say that the adoption of the state income tax fueled explosive growth in government spending would be an understatement.

The Bangor Daily News editorialized against the new tax, and scolded legislators for their “radical departure” from sound tax and fiscal policies: “The citizens of Maine have been poorly served by their elected representatives. The cupboard will be bare two years hence and you may be sure that an upward revision of the new income tax will be sought, while…pressure groups will be bidding for increased appropriations for their bureaucratic programs.”

By the time Gov. Paul LePage took office in 2011, the top rate had increased from 6 to 8.5 percent. Worse yet, the higher rate now kicked in at just $19,500 of annual income. In effect, Maine was treating anyone with an entry-level job like a millionaire, in the highest tax bracket. And yet state government was effectively broke, with a decade-long series of emergency supplemental budgets enacted to feed the beast, as welfare spending cannibalized the state budget year after year.

This is the legacy of more than four decades of liberal Democrat control of state government. As I begin my second term in the House, it is my sincere hope that we can find some Democrat legislators in the mold of former state Rep. Jim Dudley (D- Enfield), who was first elected to the House in 1959 and spoke eloquently in opposition to the state income tax: “I feel this afternoon like an old man drowning in a sea of liberalism. I was here ten years ago when we had approximately 715 people on the state payroll. I note that this year we did get up to 2,295….If you take these figures into consideration along with how much welfare has grown and compute this for ten years hence, you will pretty much find that you are either going to be retired, working for the State of Maine or on welfare at the end of ten years if this rate continues.”

Lawrence E. Lockman, R-Amherst, represents District 137 in the Maine House of Representatives, and serves as the ranking member of the Labor, Commerce, Research & Economic Development Committee. He may be reached at larrylockman@rivah.net or 460-6518.

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