Governor Mills is proposing a big new tax subsidy for businesses. The Dirigo tax credit would cost an estimated $54.5 million per year and provide business tax credits for capital investment and worker training: 7.5-15 percent of capital investment, with a $50,000 required minimum investment; and $2,000 per employee trained, for a minimum of three employees.
Here are MECEP’s top 10 unanswered questions about this expensive business subsidy.
Will it benefit small Maine businesses?
This credit is likely to have the greatest benefit for large businesses with more employees, or businesses who already have the wealth to make large capital investments. Small Maine businesses will likely receive little, if any, benefits compared with large corporations.
Will it benefit Maine workers?
Part of the credit is for employee training, which could benefit Maine workers. However, only 20 hours (or two-and-a-half work days) of training is required for businesses to receive the credit, meaning businesses could receive the tax credit without meaningfully adding to their employee’s skills. The bill also does not require businesses to pay workers to attend training programs if they cost the employer more than $2,000.
Will it address the most urgent issues facing Maine businesses?
The most urgent need facing Maine businesses is staffing shortages. Funding would be better spent on supports that help Maine workers enter and stay in the work force, including affordable child care, affordable housing, health care, and paid family and medical leave.
Will it advance equity?
The tax credit centers on male dominated industries, rather than fields with dire workforce shortages like health care and child care that primarily employ women. This policy reinforces existing structural inequities that cause the gender pay gap. Corporate profits are at an all-time high. Policies like this exacerbate wealth inequality by giving more money to those who already have the greatest wealth.
Will it improve upon past programs?
Maine tried the same type of flawed tax giveaway program in the past — and it didn’t pay off.
Will it help Maine’s economy?
Some say by giving businesses big tax credits, they will reinvest that money back into Maine’s economy. But the fact is many large corporations will likely receive much bigger benefits from this program than small Maine businesses, and those large corporations may not be based in Maine. Research shows corporations are more likely to use funding from tax cuts to benefit shareholders rather than support workers and communities. There is no guarantee this subsidy will have any impact on Maine’s economy.
Why is Maine’s “primary economic development strategy” a business tax credit?
Maine’s primary economic development strategy should focus on helping Mainers enter and stay in the workforce, and providing the supports Maine families need to thrive, like affordable child care and paid leave. Not giving big businesses tax breaks.
Why do big business subsidies like this keep getting proposed?
There is extensive research showing these types of programs don’t work. But we keep seeing these proposals, likely because corporations and large businesses have deep pockets that empower them to influence government at the expense of others. Businesses also claim these types of programs impact their business decisions, but that is difficult to prove.
How will we pay for the long-term costs of this program?
Everyday Mainers pick up the tab when big businesses don’t pay their fair share in taxes. The long-term costs of this program will likely be paid by shifting costs onto Maine workers and small businesses.
Why don’t we pursue policies that support small businesses instead?
Small businesses are the backbone of our communities, contributing local jobs and creating vibrant downtown communities. Small businesses don’t have as much money and power as large corporations to influence government policies.