MECEP Analysis: “Revenue Collapse” Caused by Recession, Tax Cuts Responsible for State’s Budget Shortfall

January 10, 2013
Augusta, Maine (Thursday, January 10, 2013) As Governor Paul LePage prepares to release his budget for the biennium beginning July 1, 2013, the Maine Center for Economic Policy (MECEP) released new analysis which shows that lingering impacts from the Great Recession and tax cuts enacted by the 125th Maine Legislature are largely responsible for the state’s projected $881 million shortfall. “Revenue Collapse Creates Budget Gap: Maine’s Budget Challenges Are Due to the Recession and Recent Tax Cuts” finds that “The recent recession and tax cuts enacted over the past two years are responsible for the $881 million budget gap over the two-year budget cycle that begins July 1, 2013. As budget negotiations begin, lawmakers should keep this fact in mind. Fiscal responsibility means making sure Maine has the revenue it needs to build the foundations of a strong, resilient economy.”     

“Education, health care, public safety, and other basic services are at-risk during the upcoming budget process,” said MECEP Executive Director Garrett Martin. “They don’t have to be. Recognizing the sources of our current budget shortfall and taking the necessary steps to ameliorate them are essential to building a strong healthy economy that ensures shared prosperity for all Maine people.” 

“In the short term, lawmakers must focus on rebuilding a middle class hit hard by three decades of tepid income growth culminating in a severe recession,” the MECEP policy brief states. “They need to invest in the foundations of strong, enduring economy: workers, technology, research and development, roads and bridges, and schools. To do this, lawmakers must overhaul Maine’s outdated tax system by ensuring that everyone pays their fair share, rebuilding the tax base to match the 21st century economy, closing costly loopholes, and ending ineffective tax subsidies.”
 
The new policy brief is available on MECEP’s website (click here).