Raising taxes won’t plug Augusta’s $800 million hole

Have a look at the graph below. Over the past twenty years, Maine state government spending has surged 88 percent while our state population has inched ahead only 7 percent!

Overspending might have finally caught up with Augusta. The Maine Legislature is deliberating how to close a projected $800 million shortfall in the state’s next two-year budget from mid-2013 through mid-2015. Unlike in Washington, the Maine Constitution requires our public officials to balance the books every year.

However, there is no more “stimulus money” coming from Washington to help pay for Augusta’s overspending. And, it’s time to stop holding back millions of dollars owed to Maine hospitals for services provided to welfare recipients. Our 39 hospitals have been laying off employees, in part, because Augusta owes them $484 million going back to 2009.

Some state legislators want to help plug the $800 million budget hole they created by raising your taxes.

That’s a bad idea. Adding to Maine’s already smothering tax burden will hurt our families even more as they struggle through the deepest recession in 70 years. Here are three reasons why it’s so expensive to live and work in Maine:

You pay Augusta the 8th highest state income tax in America. You send Maine Revenue Service 7.95 percent of your annual earnings above roughly $21,000 if you file your tax return as an individual. You pay the same 7.95 percent above $42,000 if you file jointly with your spouse. Nine states collect no income tax from their residents, including neighboring New Hampshire.

You pay Augusta the 16th highest gas tax. 31.5 cents in tax for every gallon of gas you buy heads to Augusta. That’s nearly $5 out of your pocket every time you fill up a 15-gallon tank.

You pay your city or town the 6th highest property taxes in the country. Your property tax has, on average, more than doubled over the past 20 years. If you live in Auburn, your single-family home property tax is around $3,300 per year. In Lewiston, it’s about $3,000.

When combined with Maine’s 5 percent sales tax, all of these taxes (and more) impose the 9th highest tax burden in the nation on Maine residents. We pay the 9th highest share of our mostly low-wage incomes to state and local taxes.

During the past year, there has been divisive “pay your fair share” political rhetoric surrounding the tax issue. It does not help those climbing the economic ladder to vilify and penaliz those who are ahead. Somebody does not earn more money when someone else loses his.

I hope the Maine Revenue Service data below advances a civil discussion about who fairly pays to educate our kids, pave the roads and care for the needy. The highest 11 percent of Maine wage earners pay 58 percent of all state income taxes.

Income tax filers income taxes paid

• 66% earn less than $50,000 per year pay 12 percent of all income taxes collected

• 23% earn $50 – 100,000 per year pay 30% of all income taxes collected

• 11% earn over $100,000 per year pay 58% of all income taxes collected

Some legislators believe that raising the state income tax from 7.95 to 8.50 percent for “wealthy” Mainers will close the $800 million budget shortfall caused by Augusta’s overspending. However, already high taxes and expensive energy and health insurance premiums have driven most of Maine’s wealth out of state. Of 1.3 million residents, only 12,749 income tax filers earn over $200,000 per year. Taxing them at 8.5 percent will collect an additional $25 million. Taxing the 66,524 income tax filers earning over $100,000 per year at 8.5 percent will bring in an extra $31 million. There’s simply not enough wealth left in Maine to be taxed to plug that $800 million budget hole. Trying to do so will make this difficult situation worse, as more Maine businesses, jobs and families will leave.

Government overspending at the federal, state, and local levels is the root problem of the growing fiscal crisis across America. Over the past two years, Maine state government has started down a new fiscally disciplined path. A smaller government will spend less, tax less, and regulate less. Combined with less expensive energy and health insurance premiums, these incentives will attract business investment and more jobs. Let’s encourage our legislators to create this inviting business climate and help our fellow Mainers climb the ladder of prosperity.

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MARK GRAVEL's picture

Kudos - very well

Kudos - very well said.

Better living through smaller government!

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