Spitting out the taxation medicine

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The 123rd Maine Legislature wrapped up its first regular session a week and a half ago without passing comprehensive tax reform. This disappointed many Mainers, including me. However, I wasn’t surprised at the outcome. In most political fights, organized negativity easily beats a messy attempt at reform. The special interests won the fight and the status quo is preserved. For now.

Who were these victorious special interests? They were a group of private businesses and associations calling themselves the “No Tax Shift Coalition.” This group was a large coalition of business interests that lobbied hard against the effort. The group included the Maine State Chamber of Commerce, Maine Association of Realtors, and the Maine Pulp and Paper Association.

This group was sophisticated in getting its message out. Talking points were posted June 8 on the Maine State Chamber of Commerce’s Web site that instructed opponents how to frame the issue: “The so-called tax reform package is actually not tax reform at all. It is nothing more than a shifting of tax burdens from some taxpayers to others. Put another way, it simply increases some taxes to reduce others.”

In addition to the tax shift argument, reform opponents had no shortage of services that would be newly taxed under the ultimately unsuccessful LD 1925. According to a list accessed on the Maine State Chamber Web site, here were just a few: haircuts and hairdressing, tattooing, dry cleaning, art restoration, snow plowing, driveway sealing, movie tickets, martial arts lessons, jugglers, golf courses and paintball.

The sheer number slated to be taxed made it easy for opponents to form a large coalition opposing the bill.

The intricacy of the issue also led to its collapse. Rep. Scott Lansley, R-Sabattus, foreshadowed the ultimate failure in late May when he stated, “the complexity of the whole process is probably (going to be) its downfall.” I am sure many warned then-first lady Hillary Clinton of the same in 1993, as she unveiled her health care reform plan.

One of the most vocal Republicans to fight for reform was Sen. Peter Mills of Somerset County. Toward the end of the legislative debate, he spoke of both the difficulty, and necessity, of the endeavor: “I don’t think this is easy politicsThis is taking your medicine time.”

Unfortunately, the medicine wasn’t taken. Maine is still stuck with an antiquated and unfair tax system.

Opponents of this tax reform effort would probably take issue with being characterized as special interests. They might claim that the public interest would benefit if state government reduced taxes on individuals and cut government spending. Job growth would be jump-started as the state became a more attractive place for businesses to locate. Moreover, all Mainers would become wealthier if they were allowed to keep more of their money.

How could this be construed as special interest favoritism?

Implicit in this argument is the assumption that supporting business interests is the accepted, or standard, position that government should always take. This is a problematic assumption. The reality is much more complicated. Often times, the demands of business help create the very problems that government is asked to address, if not solve.

For example, in order to successfully compete, businesses have to reduce costs as much as possible. One way is to pay their workers low wages. Another is to not offer their employees affordable health insurance policies. The dearth of jobs that pay good wages and offer adequate and affordable health insurance is nowhere near where it should be in Maine today.

Businesses hold a privileged place in American society because they create jobs and wealth. In that way, they truly serve the public interest in our market-oriented economy. However they can also act like special interests and create an atmosphere of negativity which impairs much-needed reform. Unfortunately, too many of them acted this way in the tax reform debate.

What should happen next?

Gov. John Baldacci should call a special session of the L:egislature in September to deal with tax reform. He should demand the powerful actors in Maine politics put their cards on the table. What can they live with and where can’t they compromise? Three important players in this potential drama will be the state chamber, legislative Republicans and legislative Democrats.

The governor must somehow get them to compromise their interests, but not their identity.

Karl Trautman is chairperson of the social sciences department at Central Maine Community College. He received his doctorate in political science from the University of Hawaii. He can be reached at karltrautman@yahoo.com.

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