Undoing Maine Legislation

Q: If you could undo anything Maine lawmakers have enacted, what would it be?

Sean Faircloth

I’d like to see Maine’s high income tax rate removed from the books. We need to cut taxes for Maine citizens.

That change should have come based on a bipartisan tax cut proposed by the Taxation Committee. That tax cut would have put more than $200 net into the pockets of Mainers at all income levels. Moreover, it would have changed the entire way Maine is thought about for the better, cutting our top income tax rate from seventh in the nation to 34th. Business leaders have sought this change for decades. Sadly, the spinmeisters tricked many into believing the tax cut wasn’t a tax cut.

If you want a tattoo, go for it. But why are so many Maine businesses subject to sales tax when tattooing isn’t?  

Part of the proposed tax cut was paid for by a booze tax, which some call a sin tax. A “sin”? Never!! Sometimes booze is a mistake, leading to other mistakes (e.g., tattoos). But a sin, booze ain’t. Taxing people out of their modest homes? That is a sin. Imposing a high income tax on a working family making $35,000 a year? That is a sin.

The bipartisan tax cut bill proposed something to address real sins: helping to pay for it, in part, by taxing discretionary items—for a NET major tax cut for you! 

When Mainers vacation elsewhere, we consider who we’re visiting and how we get there—not lodging taxes. Tourists will visit Maine even when our lodging tax matches theirs. Everyone got excited about the Brookings Report. It called for lodging taxes, but those led to a net tax cut—for 90% of Mainers (rich, middle, and poor).

The bipartisan tax cut would have addressed Maine’s tax instability. Experts have long known Maine’s tax code is so unstable that state revenues wave up and down like a full-blast fire hose with no firefighter in sight. For decades big money lobbyists meddled, creating a Swiss cheese of unfair loopholes in our sales tax code (tax your business, but not the tattoo guy). The tax cut fixed that, too.

The bipartisan tax cut would put $200 dollars in the pockets of Maine people at all income levels, and even more to high income Mainers.

There have been repeated attempts to mislead Mainers about the truth: The committee’s proposal was in fact a tax cut. Because of misleading ads, and misleading emails, and misleading tactics coming from special interest spinmeisters, voting to cut taxes required real courage.

I am proud of Maine House members who stood up to lobbyists and spinmeisters. The Maine House courageously supported tax cuts. This single great historic act would have dramatically changed how Maine is perceived and how we are ranked compared to other states, and, more importantly, how we view ourselves. Passage of this proposal would have moved Maine’s income tax from seventh in the nation to 34th.

Voting against the tax cut was bad business.

Scott K Fish

My choice for a law worth repealing is the tax allowing Maine government to rob graves. Maine’s estate (“death”) tax is government’s final tax on what we’ve spent our lives building/saving to pass along to spouses, children, grandchildren. The death tax is so mean it often makes it too expensive for our heirs to accept family members’ last wishes, i.e., keeping alive the family business.

Don’t just take my word for it.

J. Scott Moody, vice president of policy and chief economist at Maine Heritage Policy Center, studies the effects of national/state “death” taxes. “At best,” Moody says, “the estate tax is double-taxation of income. It is impossible for income to make it through the gauntlet of income, sales, and property taxes without being taxed. The estate tax is taxing the same stream of income again.”

Worst case? The estate tax is income taxed five times, Moody says.

Complying with the estate tax is time-consuming and expensive. The IRS estimates it takes 35.3 hours and costs $1,382 to file each federal estate tax form. The Maine Revenue Service says 3,000 Mainers filed an estate tax form. Moody says, “It costs Mainers at least $4 million (3,000 x $1,382) to file their estate tax—or over 10% of Maine’s average estate tax revenue.

Moody says former member of President Clinton’s Council of Economic Advisers Alicia Munnell used a more in-depth look at how much it costs to comply with the estate tax. Munnell found compliance costs and the estate tax revenue raised were a wash.

Who’s hurt most by the estate tax? “Family-run businesses,” says Moody. “A Federal Joint Economic Committee report found “it . . . reasonable . . . to conclude. . . the estate tax has contributed to the sale/dissolution of thousands of family firms.”

In other words, mom and dad build a family business to pass on to their children. Too often, mom and/or dad die, the children don’t have money to pay the estate tax, and are forced to dissolve or sell the business to pay the tax.

Maine government should encourage, not punish, job creators. Once in a very blue moon a wealthy Mainer dies and their estate taxes provide government a “windfall profit.” Most often the tax’s damage to Maine’s economy is greater than any revenue raised. “The average amount the Maine estate tax collected FY 1996–2006,” says Moody, “is about 1% of all taxes collected by Maine government in FY 2006.”

What if my wish comes true and Maine’s estate tax is repealed?

According to Moody, “Outright elimination would provide a very visible signal to businesses that Maine is open for business. Continuing to cling to a tax 26 states and the federal government have stopped or are phasing out is economic suicide. Two states without estate taxes should really concern Maine: Florida and Nevada, where many Maine snowbirds already spend their winters. What if, because of Maine’s estate tax, the snowbirds decide not to come back?"