A first reading of the latest serious attempt at tax reform in Maine is encouraging. Formed by Speaker Michael Saxl last year, a group of distinguished Mainers from across the political spectrum have produced a draft report that quickly gets to the core problems of Maine’s tax system. Moving beyond their proposals to passing legislation, however, is likely to be difficult.
The Speaker’s Advisory Committee on Tax Reform identified as problems the volatility of the state tax system, its overreliance on property tax, the narrowness of its sales tax and the steepness of its income tax rates, among others. Its 10 members, backed with dozens of technical advisors, used five principles to find compromise and suggest policy on a comprehensive reform. The principles were easy enough: reduce volatility, improve tax fairness, lower the tax burden, find savings through efficiency, balance the mix of state and local revenues.
Their findings will be known to anyone who has examined the issue; what is different is both the urgency with which the commission sees the need for tax reform and its willingness, while listing which taxes must be reduced, to also list which are to be added. It is a serious attempt and does not try to hide its proposed bad news. Some of the cuts are as follows: Offer a Maine Home Tax Credit for families earning jointly up to $75,000 a year to lower the property-tax burden; eliminate the tax on business equipment to help industry while removing an annual debate among lawmakers; increase the personal exemption on income tax and drop the top rate from 8.5 percent to 8 percent.
The plan also helps service centers by increasing revenue sharing, further reduces swings in the state budget by establishing a stabilization fund, pushes local government and schools toward greater cooperation and calls for a review of payments in lieu of taxes for nonprofits. The commission didn’t flinch in listing proposed tax increases that leave their plan revenue-neutral – a list of 19 sales tax exemptions it would eliminate, and increase on meals and lodgings taxes and an increase on the taxes for beer and wine. Policy-makers certainly could find other issues to add to the reform mix or insist that the components lists not change so gradually but, given the failure of reform on numerous occasions and the fact that this version is supported by Democrats, Republicans and independents, it is plenty ambitious.
Ambitious, but not alone. Legislators will consider at least two other major reform proposals this years, including one prompted by the Maine Municipal Association that received a record number of voter signatures on its petitions last November and will likely go out for voter approval this fall. Former Speaker Saxl, while observing the commission’s recommendations and the MMA proposal are not in competition, concedes that making the plans work together would be complicated.
Lawmakers now have several substantial options for tax reform and a clear crisis to know they must act in the next year. They may need a special session to put together a final package of reforms but they certainly have no excuse for not finishing the year by providing Maine with a new tax system.