Tax Relief and Reform Greatly Spurred by New State Law

July 1, 2009

ABOUT THE AUTHORS:  Karl Turner is a Republican and a former state senator from Cumberland.  James Cohen is a Democrat and a former mayor of Portland.  

PORTLAND — We agree with the many economists who say that Maine's new tax reform law will improve Maine's economy – and put more money back in our wallets.

As The Wall Street Journal said in a June 23 editorial about the plan, "No state has improved its economic attractiveness more than Maine has this year."

For decades, we talked about reforming our state tax code to look more like other states, but nothing happened until this year.

We congratulate the Maine Legislature and Gov. Baldacci for making it happen.

As members of the Portland Regional Chamber, we had the opportunity to participate in an extensive process to understand the tax reform bill, help shape it, and strongly support its passage.

The plan accomplishes most of the tax reform goals set forth in a 2003 report issued by the chamber, and the chamber's support follows a process involving more than 100 of our members.

We support the new reforms because they offer:

• Lower income tax rates: Under the new plan, the top marginal income tax rate will drop from 8.5 percent to 6.5 percent, or 6.85 percent for people earning over $250,000. That's an extra $1,000 saved for every $50,000 earned.

Consider how this will help your son or daughter afford to live in Maine. Or make it easier for retirees to remain Maine residents rather than becoming Florida residents for tax purposes.

How about entrepreneurs looking to create jobs? By lowering Maine's capital gains tax rate by nearly 20 percent, investing in Maine just got a lot smarter.

Tax reform also sends an important economic message to individuals and businesses from away: Maine is cutting income taxes while other states are raising them.

• A lower tax burden: Although the tax reform package is revenue-neutral, the package actually lowers the tax burden on Maine residents by more than $50 million a year.

The savings are accomplished by asking nonresidents to bear their fair share of the cost of our public works, conservation and public safety services.

Yes, we'll see a small increase in the meals and lodging tax and new sales taxes on some amusements, recreation, candy and personal services.

But as the Brookings Institution said in Charting Maine's Future, Maine is a "cheap date" when it comes to how we tax nonresidents.

And even with these modest sales tax increases, Maine's sales and lodging taxes will remain in line with most other states. But Maine residents will be big winners.

• A more competitive business climate: For years, Maine people have been calling for lower taxes, particularly lower income taxes, where Maine's 8.5 percent rate is seventh-highest in the nation.

This year's tax plan directly addresses the problem by implementing a substantial 23.5 percent reduction in our income tax rate – and that moves Maine to a more respectable 20th place among states.

That's good for Maine residents and Maine businesses, regardless of party. It's also what Maine needs to be competitive in a global economy.

• The good of the many: Because Maine's tax reform plan broadens the sales tax base to pay for a substantial reduction in Maine's income tax, some special interests have sought to dismiss the plan as just a tax shift. They are also organizing to repeal the plan.

But Mainers aren't swayed by sound bites or special-interest politics. They understand you can't get something for nothing. But if you can spend a little and get a lot, that's a good deal.

That's why this tax plan is a good deal. It buys us a lot of income tax relief for a modest sales tax cost.

Maine's tax code has been out of balance for years, and it has cost our economy dearly.

This year, after years of careful planning, we took a positive step toward restoring the balance and lowering our overall tax burden.

Tax reform makes sense for Maine. Let's give it a chance to work.
– Special to the Press Herald

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