Maine is probably not as bad off as some would have us believe
Taxes, taxes, taxes. They are always too high. On that we can get agreement most of the time. And it does not really matter what the tax rate is – it is almost always simply too high.
This has been the case through the ages. In all of history, from ancient times to the present, the tax collector is despised. Simply put, taxes take a part of whatever silver we have earned and redistribute it to provide services for the common good. The common good is, of course, an elastic concept. It can be restricted to security matters, or it can include a more expansive list of services, including education, health care, food stamps, etc.
In Maine, and in the country at large, we seem to be in an overheated environment of anti-tax mania. From the lips of virtually every politician running for office comes the equivalent of Bush the First’s promise: “Read My Lips, No More Taxes.” (Fees may be necessary, though!)
Of course, Bush the First deviated from his vow, and he was not re-elected. The last candidate for national office whom I can remember running on a platform advocating an increase in taxes to balance the budget was Mondale, and we can all remember what happened to him.
The current administration in Washington has two major beliefs supporting their tax-reduction plans. First, there is the catchy notion that all of us know better how to spend our money than people in Washington do. President Bush is fond of hurling the accusation that politicians in Washington want to take “your money” because they think they know how to spend it better that you do. This is American individualism gone galactic! Can you imagine what a mess we would have if we did not have a sane taxation policy that allowed us as a society to tend to our common needs?
The second assumption is that if we allow the money to remain in the private sector it will fuel great economic progress. Reinvestment in the productive capital and infrastructure of the nation will advance, and so will gross national product. We have seen some significant growth in GNP in the last couple of years, but we have not seen a commensurate increase in wages for the middle class. It is that old trickle-down thing. Again, it never seems to trickle very far down the socioeconomic ladder.
In Maine, the argument takes on another dimension. Taxes make us a state not friendly to business. We need to cut taxes, and presumably, cut services so we can offer a more welcoming business environment. The recent action of the Legislature on the BETR tax is an example of how this argument plays in a major way in Augusta and all across the state.
A recent piece by Robert Tannenwald of the Federal Reserve Bank of Boston produced by the Maine Center for Economic Policy deserves some consideration by us all. Based on the data, he raised fundamental questions about how much tax policy influences business decisions about where they will locate. He points out that much of the printed material comes with a bias, produced by trade groups trying to make a point. He urges us to be very cautious concerning studies before we give them any credence.
A 1996 study shows that “taxes do not appear to have a substantial effect on economic activity among states.” They do make a statistically significant difference in interregional areas. For example, it might mater more in the area encompassed by L/A to Portsmouth, Durham, N.H., and Dover, N.H., than between Maine and Rhode Island.
Other issues take on greater significance than do taxes.
Labor is important. Maine has enjoyed a good reputation for a labor force with a strong work ethic. Beware. That may not serve us so well in the future. We will need a workforce with a good work ethic and skills appropriate to a 21st century economy. In other words, we will need a labor force that works hard and works smart.
Transportation is a big factor, especially for manufactured goods. And, we must not forget utilities; heating costs are a major factor. We can’t do much about the location of Maine, but we can concentrate future development on businesses where it does not matter where they are located, such as so-called “back office” businesses and hi-tech businesses. Given other major considerations such as those above, taxes appear to be a “small tail” with which to wag this business development dog.
We also need to remember that a number of companies seem to function very well in Maine with its tax policies.
L.L. Bean is not hurting for profits, having just completed one of its most successful years in history. All the wonderful development in the L/A area is happening in spite of what many consider to be a business hostile tax policy. What am I missing here? Would they like to have lower taxes and more profits? Sure. Going back to the beginning of this piece, it is a reflex response to oppose taxation. But when we look below the default response, there is a more complicated picture.
The Committee on State Taxation found that Maine ranked 13th, with a business share of the whole tax burden in that state at 40 percent. This includes the BETR tax and does not account for the fact that energy intensive companies tend to export their taxes to customers. Who is not energy intensive in Maine?
So, what does this all mean? Go slow with the anti-taxation mania. It is full of bad data. We are probably not as bad off as some would have us believe. And we must not forget that we have a constitutional obligation to the common good, and the way we fulfill that is to raise taxes as a mean of redistributing wealth and services for the greater good of all.
Not a bad idea to keep at the forefront!
Jim Carignan is a retired educator who lives in Harpswell. His e-mail address is firstname.lastname@example.org.