Republican legislators have put a tax reform plan on the table, and though we haven’t digested it yet, it tastes pretty good so far. The budget will need a two-thirds vote of the Legislature to pass and a two-thirds vote to override a potential gubernatorial veto.
Republicans have proven themselves quite capable of the Great Reverse, supporting a bill in committee and on the floor of the legislature but opposing it once the governor has vetoed it. But the budget is different.
The budget will be standing between legislators and their flip-flops and lemonade. Summer is coming, and no one wants to spend it in Augusta.
Republicans have now answered Democrats’ criticism about being the party of “no.” They have put a plan out. They also have taken a step, if not two, away from their governor. Senator James Hamper, senate chair of the Appropriations Committee, staked out the legislative ground on behalf of his committee. “Whatever we decide on, the 13 of us, it is ours.”
Their budget takes smaller steps toward the governor’s goals, and the governor is not a baby step kind of guy. He will not be happy where Republican measures fall short of his proposal. Their plan lowers the income tax, though not as much as he did. It raises the sales tax, though not as much as he did.
“Not happy” is one thing, ballistic is another, and that might be the governor’s mood about the bigger points of disagreement between his budget and theirs. However, those areas where Republicans stray from the governor’s budget are the very ones that might bring enough legislators together to get the budget passed.
Republicans have preserved municipal revenue sharing and dropped the governor’s proposal to tax nonprofits. Both were non-starters with Democrats, as well as with much of the public. By softening the governor’s revenue reductions and preserving or increasing certain revenue enhancements (taxes), their proposal does not rip nearly as big a hole in out-year budgets as the governor’s did.
Republicans must appeal to their own party members, too. The Republican sales tax increase (continuing the current 5.5 percent rate which otherwise would sunset this June) is lower than what the governor proposed (6.5 percent). Point in favor. But the R’s have increased the meals and lodging tax to 9 percent. Point opposed. Will they be able to sell that as a tax “export” meant to target visitors to Maine? Stay tuned.
Republicans tossed out the plan to expand the sales tax base, a proposal that has been run up the flagpole only to be ripped to shreds time and time again. Our tax base will continue to shrink, and there will be steady upward pressure on the rate unless we finally bite the bullet and extend sales taxes to many services, now a larger part of our economy than manufactured goods.
As always, the path to a public plan is developed behind closed doors. Both parties develop their plans in private, just as Republicans did with this one, and Democrats will chew it over out of sight. In the meantime, signals will be flying fast and furiously about which parts are “likes” and which parts will be the biggest sticking points.
The latter are likely to include the question of who benefits most from which tax cut proposals – Democrats say theirs would target the lower and middle class, while Republican changes will benefit those with higher incomes (by getting rid of the estate tax and reducing the corporate income tax).
Actually, the Republican proposal spreads tax benefits over the full income range. Those who earn less than $15,500 will pay no taxes, and tax brackets are adjusted to be more progressive – those at lower incomes will pay at a lower rate.
According to the Maine Center for Economic Policy, only Mainers with a net worth of over $2 million pay the estate tax, about 150 decedents per year. These high-worth individuals, the argument goes, do not need this tax break.
With this proposal, Republicans have walked more than a little way toward the Democrats’ preferred budget. It reduces taxes for individuals and businesses and eliminates those parts of the governor’s budget that would have made agreement impossible.
Early murmurs are leaning toward suggesting that there is some workable middle ground emerging. Republican Senate President Mike Thibodeau called it a “common sense proposal.” House Republican leader Ken Fredette said he and his colleagues “fully support our Republicans on the Appropriations Committee as they work through the complicated process of putting together a state budget,” though he cast his party’s income tax proposal as a “road map” to complete elimination of the income tax.
On the other side of the aisle, House Speaker Mark Eves expressed optimism that “there is a path forward,” expecting that the parties could “sit down and try to hammer something out.”
It would behoove leadership on both sides to allow the Appropriations Committee room to work without undue influence. If they can accomplish the delicate task of pulling the committee together, the full legislature will face heavy pressure to follow suit.