Shootout at the not-so-OK Corral



The State House looked like the OK Corral last week. On Monday, April 20, Governor Paul LePage sent legislative leadership a letter giving them 24 hours to agree to co-sponsor his bill for a constitutional amendment to repeal the state income tax. Republicans jumped in line, Democrats not so much.

Just because they opted not to become co-sponsors does not mean Democrats could not support the bill as it wends its way through the system. Wait, never mind. They’re not buying.

The D’s, who introduced their own “Better Deal for Maine” tax reform plan earlier in the month, let the governor’s deadline come and go. The governor promptly described them as enemies of prosperity. The bill, LD 1367, is now in print, sponsored by Republican leadership alone.

LePage already has scored a victory, though we don’t yet know its magnitude. There is going to be tax reform this year. His budget proposal, which the Appropriations Committee is now trying to work into a document that will pass in the Legislature, gradually lowers the income tax, and he has been clear that his end game is the disappearance of the tax altogether.

He proposed the constitutional amendment because it is the best way to protect his proposal, or any proposal, from the vagaries of the legislative process. What is done by a legislature can be undone by the next one. A constitutional amendment takes a lot of work, and it is as hard to undo as it is to do.

First of all, both the House and the Senate must agree to the proposed amendment with a 2/3 vote of support. If Democrats stick together, neither chamber has the necessary votes. This means the question must go to public referendum.

The proposed amendment would provide that the Legislature could “never, in any manner, enact or impose a tax upon the income of any person” as of Jan. 1, 2020. For once, the language of the referendum would be quite clear. The matter would be in the hands of the people.

What’s not to love about killing a tax? Given the opportunity to vote against giving money to the government, who can resist? But resist we can, and resist we should. Here’s why.

A press release from the governor’s office announcing his proposed constitutional amendment says the proposal “would put over one billion dollars a year back into the paychecks of hard-working Maine taxpayers.” That much more money in the pockets of Maine income-earners would boost Maine’s struggling economy.

Indeed, that it may do, but what would it do to government services? The tax cuts in the governor’s budget proposal that decrease but do not eliminate the income tax already are proving hard to fund. The governor himself acknowledged that we cannot simply erase that much revenue, and proposed to eliminate state-municipal revenue sharing and the taxing of nonprofits to help make up for revenue lost by lowering the income tax.

LePage’s tax reform plan is not fully implemented until the ensuing biennium, so if it were to pass as is, we would not see the full impact until 2017-18, when another $300 million in lost revenue would have to be accommodated. To toss out the income tax altogether and lose over a billion dollars in revenue would be massive.

The Legislature’s Office of Fiscal and Program Review website shows that budget expenditures for Fiscal Year 2014 totaled $7.7 billion dollars. However, income tax revenues accrue to the General Fund, which amounts to a bit less than half of that ($3.15 billion). So it is a loss of a billion out of $3.15 billion, not out of the total $7.7 billion.

No single category of expenditure reaches a billion dollars. All of General Purpose Aid to Education comes closest at about $913 million. Medicaid (MaineCare) is $739 million. Personal Services, Higher Education and Teacher Retirement combined do not total a billion dollars. Everything else? Marine Resources, Inland Fish and Wildlife, Agriculture, Corrections, Natural Resources, Labor, Judicial and the Legislature itself add up to little more than half a billion.

Say what you will about government waste and inefficiency, there is no way to streamline state government in a way that saves a billion dollars. Does government do too much? You would have to cut school spending and Medicaid both in half plus eliminate most of the other state departments to reach a billion dollars in savings. Seriously?

What may sound to some like a gift from heaven – and let’s agree from the start that the income tax is indeed too high and the brackets are crazy – would be enshrined in our constitution. Should we have buyer’s remorse, as other states who tried this radical economic surgery have had, we would be stuck with it until another constitutional amendment could be passed to save us.

The governor got off to a good start, with some sensible tax reform plans in an overall package that, while some elements could be disputed, would have gotten us further than we have in two decades of beating our little pointy heads against the tax reform stone wall. The constitutional amendment is the wrong solution. It should be rejected by the Legislature and turned back by the voters.

jillgold@gwi.net

 

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