Time to Get Serious About Solving Maine’s Budget Crisis

Governor LePage’s budget proposal raises taxes. It contains property tax increases AND income tax increases.

There are better solutions. Unfortunately, when Democratic members of the Legislature’s Appropriations Committee tried to engage their Republican counterparts in a discussion of these last night, the silence was deafening.

This kind of response does not bode well for passing a budget that restores local school funding, avoids dramatic property tax increases, promotes financial security for the elderly and people with disabilities, and creates pathways to success for struggling families.

While it is true that a family facing tough times will find ways to cut spending, they’ll also find ways to increase their income. That’s the predicament we’re in. We’ve cut spending. In fact, adjusted for inflation, state spending through the general fund is the lowest it’s been since 1998.

Today, Republican members of the legislature highlighted how bad things are. They called on the appropriations committee to restore $368 million to the governor’s budget to avoid some of the most egregious cuts and prevent property tax increases. They sought to pay for these changes by cutting spending in ways that have been rejected time and again by Republicans and Democrats alike and putting forward an unprecedented proposal to tax nonprofits and take over the assets of the Maine Health Access Foundation.

For months, we’ve talked about better revenue alternatives. If we use the $358 million benchmark established by Republicans today, here are some alternatives and how much they would raise in the coming biennium.

  1. Rollback the 2011 income and estate tax cuts. A majority of Mainers would be far better off if we rolled back these tax cuts to avoid massive property tax increases. Low- and middle-income Mainers who derive no benefit from the estate tax cut and who pay a much greater share of their income in property taxes versus income taxes would benefit the most. This action alone would raise almost $400 million.
  2. Equalize taxes for the top one percent of Mainers. The top 1% pays less in state and local taxes per dollar of income than the average Mainer. Making sure they pay the same effective state and local tax rate as everyone else would raise about $150 million.
  3. Increase the meals, lodging, and car rental tax. Maine’s lodging tax is one of the lowest in New England. We should ask more from out-of-state visitors and can raise approximately $160 million.
  4. Enact a temporary sales tax increase. The last time Maine faced a budget crisis this bad, the solution was to temporarily raise the sales tax by a penny. Doing that now would raise approximately $270 million.
  5. Get rid of ineffective tax subsidies. We give away hundreds of millions of dollars to corporations through our tax code in the form of subsidies and other tax breaks. Many of these have little accountability and do not strengthen Maine’s economy. At a minimum, a task force should be appointed to identify $30 million in savings.
  6. Increase the tobacco taxes. Raising cigarette taxes by $1.50 a pack and making sure other tobacco products are taxed at a similar level would raise approximately $120 million.

There are plenty of other options that merit consideration. The Republicans must be party to these negotiations. They cannot continue to abrogate their responsibility for helping to craft a state budget. They cannot continue to ignore the need for responsible revenue solutions. To do so, places thousands of hardworking Maine people in harm’s way.