April 08, 2020

Raise pay to lower tax burden

My wife, daughter and I moved to Maine in January 2001 from a small town along the Delaware River in New Jersey. Since coming here we’ve heard that taxes in Maine are among the highest in the country. Yet we cut our taxes, the actual amount we paid in taxes, in half by moving to Maine. And they are still half of what we would be paying had we stayed where we were. How can both be true?

The argument that Maine taxes are among the highest in the nation is correct only if you look at Maine’s overall per capita tax burden as a percentage of personal income.

If you lived in an area where the average income was $200,000 and each person paid $5,000 in overall taxes, this is two and one half percent of personal income. But in an area where the average income is only $50,000, paying $2,500 in overall taxes is 5 percent of personal income, even though the actual amount paid is half.

By this measure, people living in the lower income area pay more, as a percentage of personal income, for everything they own; their car, their television, their clothes, everything.

So now we have TABOR; a 28-page initiative that most people haven’t read reduced to one seductive question on this November’s ballot. Its proponents argue that putting limits on the ability of government to spend is the only way to tackle this high tax burden. But is this true? Raising wages would also make the tax burden, as a percentage of personal income, go down. And is the state of Maine paying so much more for the services it provides than other states?

If a town of 3,000 taxpayers needs a fire truck that costs $500,000, each taxpayer will have to pay one $167. The collection might be progressively applied so that people with greater means will pay more than people of more modest means, but if the town needs the truck to be able to protect homes from fire, that’s what it costs. The manufacturer isn’t going to lower the price simply because the average personal income of the townspeople is low.

Comparing what Maine spends on services with what other states spend on those same services per capita leads to the conclusion that Maine’s spending isn’t grossly disproportionate. However, Maine’s average personal income is disproportionate. This is not to say that Maine doesn’t have any problems with its spending, and simply saying people will probably earn more in the future doesn’t make today’s tax burden any less. Yes, there are areas that can stand to be reviewed and more thrift applied in providing particular services. And yes, when savings result in some spending cuts, some tax cuts should follow.

The notion of giddy legislators, selectmen or town managers running around opening new avenues of spending every time tax collectors report a surplus needs to end at all levels of government.

After all, it is the people’s money.

The question is how best to bring down this tax burden as a percentage of personal income. Do we put a strangle hold on spending; government can spend this much and no more regardless of what needed infrastructure and services might actually cost? Are businesses that pay higher wages going to develop in Maine, or move here, if our roads are in disrepair? Are they going to come here if we don’t have adequate police and fire services? Are they going to develop here if we don’t have a good educational system, higher education with research & development or if our health-care system is shoddy?

Certainly we should make sure that Maine isn’t paying more than necessary for needed infrastructure and services.

But investment in infrastructure and services is needed to make sure Maine stays competitive with the rest of the country.

And the kind of growth that comes with investments such as this does not come over night or in one election cycle. It takes time, dedication and hard work.

TABOR is like a diet pill sold on the basis that you can lose weight just by taking it.

Every physician will tell you that, barring certain medical conditions, the way to lose weight is to eat less and exercise more. An easy formula that is very hard to implement. TABOR is that diet pill.

It’s easy to take, but it doesn’t work and, if other states who have taken it are any example, may actually do more harm than doing nothing at all.

Ben Lamborn of Levant is an attorney and a Democratic candidate for state representative in District 22.

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