At a Blaine House press conference yesterday Governor LePage announced that if elected to a second term, he will seek to eliminate the state income tax.
This is a bad idea with even worse consequences for Maine’s economy.
1. We can’t cut our way to prosperity. Eliminating Maine’s income tax means other taxes will have to go up to maintain funding for education, health care, roads, police and fire protection, and other critical public services and investments. The Governor’s current budget proposal is a clear example of such a tax shift. To pay for income tax cuts passed in 2011, the Governor has passed the buck to mostly low- and middle-income property taxpayers. His budget directly raises property taxes for hundreds of thousands of low- and middle-income households. It also shifts more of the costs of education, public safety, and other basic services to towns and municipalities, which face a Hobson’s choice of cutting vital services or raising property taxes.
2. Eliminating the income tax is not a strategy for growth. It is a scheme for making the rich richer, gutting funding for public services like education, and tipping the economic scales against low- and middle-income workers. Eliminating the progressive income tax results in a windfall for those whose incomes are highest. Meanwhile, low- and middle-income taxpayers will pick up a greater share of the tab to maintain existing services. This gives high-income earners even more economic power than low- and middle-income workers, and undermines economic growth by taking money out of the pockets of Mainers most likely to spend their hard-earned dollars here in Maine.
3. States without an income tax don’t outperform states that do. The governor subscribes to the myth that states without income taxes experience faster economic growth. But the data have proven this is simply false. In fact, states that enacted substantial personal income tax cuts during the 1990s actually experienced slower income and job growth during the next economic cycle than more cautious states. Investments Maine makes in education and workforce development, transportation and high-tech infrastructure, and research and development are far more important to building a strong economy than making sure the wealthy get another generous tax cut.
4. Cutting the income tax will not keep wealthy residents from moving out-of-state. Tax changes have little, if any, impact on people’s decisions to move from one state to another. In fact, IRS migration data cited by Travis Brown, darling of the anti-income tax movement nationwide and a speaker at yesterday’s press conference, reinforces this point. More people and income moved from New Hampshire to Maine than from Maine to New Hampshire over the fifteen-year period from 1995-2010. If taxes were so important, the flow of people (and wealth) would be in the opposite direction.
The anti-income tax movement is part of a national agenda promoted by deep-pocketed interests groups like the Americans for Tax Reform and the American Legislative Exchange Council. Their primary objectives are to reduce the size of government, increase corporate profits, and make the rich richer. And as the governor demonstrated yesterday, we haven’t heard the last of the anti-income tax crusaders in Maine. We need to dispense with the snake oil prescriptions they are peddling and recognize that there are no shortcuts on the path to prosperity.