AUGUSTA — A conservative think tank in Maine is rolling out a new proposal to gradually phase out the state’s income tax, one of the top priorities for Gov. Paul LePage’s administration.
The Portland-based Maine Heritage Policy Center is touting it as a bipartisan idea that will spur growth in economically hard-hit areas. The center says it will lobby lawmakers to take legislative action next year.
Scott Moody, CEO of the think tank, said the plan uses the same philosophy behind a program developed under former Democratic Gov. John Baldacci that offers tax cuts for companies in certain sectors, like biotechnology, with the aim of helping those businesses grow.
The plan would apply that to individuals and eliminate the income and sales taxes first in Maine’s most impoverished county, Washington, and gradually progress throughout the state, he said.
“If some relief is good, then total tax relief is best,” he said. “Why should we be taking money out of an area that could use it the most in their local economy? Let them keep their money and let them develop their economy as they see it should be developed.”
It’s too soon to say whether the group’s plan will make it into any proposal from lawmakers or from LePage. But the idea aligns with his only comment on his future tax plan — that eliminating the income tax will be a goal of his if re-elected in 2014 — and he has ties to the policy organization, as some of his staffers have worked there.
If LePage, a Republican, does follow through to try to eliminate the income tax, a political fight in Augusta could be on the horizon. Any proposal to roll back the tax will likely face fierce opposition as Democrats and other critics warn it will shift the tax burden onto the poorest residents.
LePage spokeswoman Adrienne Bennett said that while it’s too early talk about policy proposals for next session, the governor is determined to reduce taxes for Maine families and willing to consider to the center’s plan.
But House Democratic Leader Seth Berry of Bowdoinham called the proposal another “race-to-the-bottom idea” that fails to connect its incentives with job creation.
“What it does, at best,” he said, “is move jobs around and in many cases it doesn’t.”
Garrett Martin, executive director of the left-leaning Maine Center for Economic Policy, said any plan to eliminate the income tax would result in higher property taxes in order to pay for things like education and infrastructure. He said the recent cuts to municipal revenue sharing, done to pay for $400 million income tax cuts, show this.
“Where are we going to come up with the money to pay for schools … roads and bridges … public safety … to make sure our correctional system is functioning properly?” he said. “All those functions are potentially compromised under this scenario and at the end of the day may serve to weaken, not strengthen, our economy.”
The center insists that its targeted and gradual approach will have little impact on the state budget and ultimately benefit the state by reducing the number of people using welfare and Medicaid.
But Berry there are more targeted ways to spend money in Maine’s struggling counties, like funding education, health care, roads and research and development programs.
“To just throw the door wide open just invites a shifting of resources rather than real economic growth,” he said.