In rebuttal, R. Reed: What are the real tax figures?

I must take issue with Rep. Seth Berry’s comments in his guest column Aug. 26. I am deeply concerned that, as a legislator, he does not have a firm grasp of taxation while sitting on the Taxation Committee in Augusta.

Berry indicates that a single parent earning minimum wage ($12,000 annually) will pay 17 cents on the dollar in taxes, to which I respond — poppycock.

I call for Rep. Berry to provide an exact accounting of each tax paid by that fictional single parent.

A single parent earning $12,000 would mean he or she works 30.75 hours per week at minimum wage. But at that level of income, she would pay no federal income tax and could receive back from the federal government an earned income credit of $3,094, plus a child tax credit of $1,000.

On her state income tax, she would have no income tax due and, under the newly-implemented tax plan, could earn even more money each year before any state income tax was due.

The only payroll-related tax she would pay would be slightly less than $600 in Social Security/Medicare taxes. Thus, her net tax would actually be $3,500 paid to her, not taken from her each year.

Given that $3,500 is added to her income, she would have to then be taxed on other items totaling roughly $5,540 each year to get to the 17 percent tax figure Berry claims she now pays.

Again, I call for Rep. Berry to provide a complete accounting of what taxes this person pays.

What Berry and others fail to mention, in each and every discussion, is the real culprit in the tax-due discrepancy: Social Security. That annual payroll tax is capped in 2012 at $110,100 — meaning anyone earning more than that amount stops paying in. Thus they have almost 5 percent more of their pay to take home and, in exchange, are capped on how much their retirement benefit can be.

The problem lies in federal taxation, not in anything done to help working Mainers.

Robert Reed, Lewiston

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Comments

Naran Row-Spaulding's picture

Great Letter

Thank you, Robert Reed. It's unfortunate when the people making our legislation and policy appear to be uninformed about taxes and the matters on which they deliberate.

Property, excise and sales taxes are taxes too

The mistake of this writer is simply that he did not read my piece. I referred to state and local taxes, which include not only income but also property, sales and excise taxes. I did not refer to federal taxes such as Mr. Reed mentions, as none of these are within the state's or my committee's control.

Taken together, state and local taxes in Maine are vastly unfair to low and middle income families - and are becoming far worse.

The 17 cent figure for total state and local tax burden is not mine, but is from the Governor's own Commissioner at Maine Revenue Services - whom even I as a Democrat trust as an accurate and professional economist. The data he uses are impressively inclusive and accurate. It should be, since MRS has access to all valuations, all (scrubbed, aggregated) income tax returns, and records of every penny of revenue submitted to the state.

To pay 17 cents of every dollar, a minimum wage single parent family need only pay a total of $2,040 in property, sales and excise taxes (gas, auto, etc) combined. If Mr. Reed wishes to understand the difference between federal and state taxes, or would like more information about the MRS data, he should direct his questions to Maine Revenue Services at maine.gov/revenue.

I am well aware that Mr. Reed is an active Republican. Perhaps he does not feel that taxes being far higher on Maine's working poor or middle class than on the very rich is a problem. If that is the case, perhaps it is not so much the facts but our beliefs that separate us.

FMI www.bhamberry.blogspot.com

Naran Row-Spaulding's picture

The Maine GOP Says Berry is Wrong, and Voted for Plan He Rejects

Maine Republican Party

For Immediate Release, August 31, 2012

Contact: David Sorensen, Communications Director
Phone: (207) 622-6247

Rep. Berry Launches Pathetic Attack on Tax Plan He Voted For

Short memory and omitted facts mark personal war in the editorial pages

"Rep. Seth Berry is being dishonest and hypocritical," said Maine Republican Party spokesman David Sorensen. "He has lied by omission and conveniently ignored his own policies of just a few years ago."

In a series of guest editorials to newspapers all over Maine this summer, Rep. Berry has been relentlessly attacking the biennial budget that he voted for. "It is understandable that there may be some things in the budget he doesn't like - no legislator is completely happy with every budget they vote for," continued Sorensen. "But the level of vitriol Berry has spewed about the tax cuts in the budget makes me wonder why he voted for them."

Berry has asserted repeatedly in his columns that the recent tax cuts passed under Republican leadership benefit the rich while everyone else loses, in one calling the tax reform "the largest tax shift in Maine history."

Berry knows that this is not true. He serves on the taxation committee. He knows that the share of income taxes paid by the top 10 percent will actually increase from 55 to 57 percent of total income taxes collected. He knows that the 80 percent of income tax payers in the low- and middle-income brackets pay only 24 percent of income taxes, but will receive 33 percent of the tax cuts, almost half again more than their "fair share."

But the truth doesn't matter to Berry. What matters is winning the election and gaining back the majority. He was the House Majority Whip two years ago, and now he is just a rank and file member of the minority party.

---> He has also been taking this fight to his fellow legislators, with whom he should be working across the aisle. He recently called the author of a column that rebuts one of his own to express surprise and anger that his Republican colleague would dare to respond. These intimidation tactics are unacceptable.

It also doesn't matter to Berry that the 2009 Democratic tax "reform" that he championed fits the mold of his own criticism. Berry specifically writes in one of his columns that those making over $350,000 per year will receive a $3,000 tax cut as a result of the GOP plan.

----> LD 1495, the bill that Berry fanatically defended and that was repealed by a people's veto in 2010, reduced income taxes by twice as much - $6,238 - for the very same group. He "paid for" this by jacking up sales taxes on everything from car repairs to dog grooming to nursing home meals. Republicans paid for theirs by cutting spending. Republicans passed real tax relief.

Berry says he wants to "put partisanship aside" in 2013. That's funny. Republicans built a bipartisan consensus for their plan, while Berry crafted his failed 2009 tax plan without Republican input and rammed it through without bipartisan support.

"The people of Maine rejected Rep. Berry's tax plan decisively at the polls in 2010," continued Sorensen. "It is pathetic for him to run around the state attacking the Republican plan that he voted for, and that Maine people kept in place."

###

Paid for and authorized by the Maine Republican Party. Not authorized by any Candidate or Candidate's Committee.

Maine Republican Party | Ben Lombard, Treasurer | 9 Higgins St. | Augusta | ME | 04330

MARK GRAVE's picture

What is the likelihood of

What is the likelihood of someone making $12,000 per year owning property and therefore owing property tax?

Moreover, the Tax Foundation documents the average State and Local tax burden for Maine at about 10%. In addition, Robert is correct in that this hypothetical individual could get an effective boost in income due to federal tax credits and other forms of public assistance due to being substantially below the poverty level.

Something does not pass the sniff test IMHO. Perhaps you need to be more specific in your hypothetical scenario, so it can be properly vetted.

Just the facts

Mark, the Tax Foundation figures agree with Maine Revenue's. What the working poor pay in state and local taxes is 17 cents on the dollar, what the middle class pays is 10, and what the wealthiest 1% pays is 9 cents.

MRS calculates property tax as a portion of rent using the latest housing and valuation stats. Renters do pay property taxes indirectly.

As for federal taxes, I would suggest those overall are unfair to the middle class but it is mixing apples and oranges to include that discussion here. If we are going to talk about federal benefits and subsidies we should be including a lot more than EITC.

MARK GRAVE's picture

I’m still seeing some red

I’m still seeing some red flags here that warrant a deeper investigation in how these number were created.

A 1% point spread between the wealthiest and middle class as you claim does not raise any red flags. However, a 7% point spread between the middle class and the poor begs a deeper look into how these numbers are derived.

First, at $12K per year, this hypothetical individual has zero State personal income tax liability, so that is out of the mix. I don’t recall any municipalities billing local income taxes, so that is out of the picture.

So what is left? What is left are taxes generated off economic activity, such as sales taxes, gas tax, etc.

While I’m not intimate with this report, these types of reports typically overstate personal behaviors, such as spending patterns, that skew reality. That said, I would want to see each line item that constitutes this report’s conclusion and vet each one.

The takeaway here is that researcher must present a basket of economic activity in which to measure tax liability. That is very subjective and not quantitative. Other studies I’ve research tend to overestimate economic activity of poor and underestimate the economic activity for the more well off.

Studies attempt to create a minimum basket of goods that all individuals typically purchase to subsist, such as food, energy, healthcare, etc to estimate consumption-based taxes. Ostensibly, the wealthy have more disposable income, so they generate more economic activity and consumption-based tax revenue. We can measure tax receipts flowing into the state from consumption-based taxes. The subjective part comes in when someone tries to cut this pie into slices based upon income levels.

Given consumption-based taxes are a large portion of low income earner’s tax liability, given that this is the most subjective part of these studies, and given that there is a relatively large point spread between the two other groups in the study, there lies my red flag.

MARK GRAVE's picture

P.S. I’m not claiming the

P.S.

I’m not claiming the referenced report is biased, but the subjectivity involved with estimating consumption-based taxes across income classes opens the door for introducing bias in these types of studies.

Betty Davies's picture

You might be surprised

Plenty of people have been laid off and have desperately taken jobs that pay very little. They are clinging to their bit of home and land, half a step from bankruptcy.

MICHAEL LEBLANC's picture

Mr. Reed indicated the single mom ...

... would receive a "refund" of $3500. You say she has to pay $2040 in non-federal taxes. She still has a net gain of around $1500.

I put the word refund in quotes because she's not getting back her money, but someone else's.

By the way, the numbers were crunched recently about completely removing the salary cap for Social Security. It would push out a grand total of six years the date SS's bankruptcy. Remove the cap, if it makes you feel good, but doing so has nothing to do with economics.

Naran Row-Spaulding's picture

She Gets the Circuit Breaker, Too

In addition to the EIC and the Child Tax Credit, the fictional single mother in Reed's example would also be eligible for the State Circuit Breaker, which gives up to $1,600 for property tax paid above 4% of income. It also gives a rebate for rent paid that exceeds 20% of income, again, up to $1,600.

So, in reality, our fictional single parent making $12K per year is receiving more tax money than she's paying out - even with the need to pay property tax, sales tax or excise tax.

Nobody's saying that our fictional working mother is living a luxury lifestyle, by any means. However, she's also not paying more taxes than a "rich person." Facts do matter.

Berry needs a remedial math and tax class. Maybe one of his pals at the MECEP can oblige.

Circuit breaker

Circuit breaker rebates are included in the ME Revenue calculations that show the working poor paying nearly twice as high an overall state and local rate as those making over $350k. So are the many loopholes and exemptions enjoyed by the few not the many.

I'll ignore the inappropriate insults, but please know you're arguing against Dr. Mike Allen, the Governor's chief tax economist and commissioner, whose outstanding work both Republicans and Democrats trust. The math is not mine but his.

Naran Row-Spaulding's picture

Response from Robert Reed

From Robert Reed:

Rep. Berry cherry picked every tax in Maine and decided which were the worst offenders and used ONLY those to come up with a ludicrous argument that cannot hold water.

He agrees there are no income taxes for this person, but says property taxes are at fault due to recent legislation...and he even admits he included circuit breaker money...and yet someone earning $12K a year pays $2,040 in taxes? If you earn $1,000 a month you qualify for Section 8 housing subsidy which caps your rent cost at 30% or $300 a month. Pretending this mythical person.llives in Lewiston she might have total rent of anywhere from $600 to $1000 for a 2 bedroom place, Meaning at least half the rent is paid by OPM (Other peoples money). So assume a multi unit building, property taxes divided by total units, square footage per unit or something else and then remove the rent paid by OPM, you have at best her share being extremely small of the entire tax bill. 3 units, her share 33%, less at least half paid OPM, her share is no more than 16% of the total tax bill for the building. ON a $150K building in Lewiston you would pay $2800 in property taxes, thus she is looking at roughly $440 in her true out of pocket share of the property taxes.

Now on to other taxes, go back to the $12,000 a year, reduce by $600 FICA tax. Then reduce by the $3000 we already assumed she MUST pay in her share of rent. She likely qualifies for food stamps which requires she spend a specific amount no food (non-taxable) of roughly $2,400. So we're left with $6,000, and of the original $2040 in tax (17%) she only used $450 leaving $1600 taxed on the remaining $6K, or roughly 26.7% tax to meet his number....now can anyone tell me which taxes in Maine are at 26.7%...yeah thats what I thought...

Feel free to poke holes in my logic, I'm always willing to learn! Now excuse me while I'm out campaigning for the evening, its clear we need smarter representation in Augusta!

**********************

Robert Reed wrote:

It gets better....Rep Berry specifically indicated a single parent earning $12,000 annually at minimum wage...seemed unusual until you do the research...thats 30.25 hours per week....anyone want to guess what the requirement maximum hours worked for a TANF recipient is.....ahh yes, wait for it.....130 hours per month max....so not only does our person get the benefits outlined above, they just qualified for 5 years of TANF....so additional income supplement (tax free) of $463, month, free child care, dental care above the Mainecare base they already receive, , 30 cents a mile reimbursment for work or school, , $500a year in car repairs, $300 a year towards car insurance, $200 a year towards glasses or contacts, $750 a year towards school books and $300 a year towards clothing...That alone more than doubles the base income, all tax free and then we add on the Earned Income Tax Credits (for taxes paid by others).....

Jason Theriault's picture

::Grabs Popcorn::

FYI - Reed does post here, so this should be interesting.

Naran Row-Spaulding's picture

Reed Says He's Blocked

Reed tells me he was blocked from posting on these pages some time ago.

RONALD RIML's picture

So you will also work to circumvent 'blocked posters' on AMG??

Naran???

MICHAEL LEBLANC's picture

What's the matter, Ron?

Lonely? Make up a name and ask to be admitted to AMG. Call yourself "Tweed Face". You'll be OK until the moderators have enough of your 7th grade vocabulary. That's about two hours, tops.

Yes, her real first name is "Naran". Some folks tell the truth. It's no wonder you can't recognize it.

RONALD RIML's picture

As Naran so often opines......

Jason Theriault's picture

Really?

Hmm, kinda funny the post an editorial but won't let him comment on it.

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