In 1969, the Olivetti Valentine typewriter was introduced, the Concorde flew its first test flight, and Maine Gov. Ken Curtis signed the state’s income tax into law.

All three have since been proven obsolete.

Unfortunately, one is still with us.

Maine’s economy continues to be strangled by the income tax. If you don’t think that taxation affects where people choose to live, just ask former Gov. Curtis. He is now a resident of income tax-free Florida.

In the century prior to the institution of Maine’s income tax, the population of Lewiston had tripled. In the nearly half-century since, it has remained the same.

New Hampshire’s government resisted the urge to tax its people’s incomes. In 1969, Maine’s population of 992,000 was 37 percent larger than New Hampshire’s at 724,000. From 1969 to 2014, New Hampshire’s population growth of 82 percent more than doubled Maine’s growth of 34 percent, and the states now have equally-sized populations.

New Hampshire also enjoys much larger personal incomes, lower unemployment rates, and lower poverty rates.

Fortunately, Maine’s governor has proposed bold action to reverse that disadvantage. The reality is, times have changed since 1969. Tourism is a much larger share of Maine’s economy today. It makes sense to let the sales tax do more of the heavy lifting by letting visitors share in the tax burden. Maine currently has one of the lowest sales tax rates in the country, so there is some wiggle room there.

Similarly, people — especially young workers — are much more mobile today than they were in the year of the moon landing. In a lifetime they will work far more jobs — even more careers — than people worked back then.

That means Maine has to do more to compete with other states to attract workers and the businesses that employ them.

Gov. Paul LePage’s tax reform plan would not only modernize the tax code by cutting taxes on income, inheritances and pensions while exporting some of the sales tax burden to tourists, it also would give Mainers a net $300 million tax cut.

Think about it. That’s $230 in the pocket of every man, woman, and child in Maine annually, or about $1,150 in the pockets of a family of five.

Under the governor’s plan, the top income tax rate would drop from 7.95 percent to 5.75 percent. Income taxes on 8,000 military pensions would be completely eliminated, returning $9.6 million to Maine veterans. The tax-free portion of all other pensions would be increased from $10,000 to $35,000. The estate tax would be eliminated.

Funding for revenue sharing for municipalities does not go away. Instead of giving it to bureaucracies in city halls, it will be given directly back to property taxpayers who need it most. The plan calls for a doubling of the homestead property tax credit for seniors and a tripling of the Property Tax Fairness Credit.

But set aside the details for a minute. The broad concept behind this plan — broadening the sales tax base to help pay for a much larger income tax cut — is an idea that has won the approval of both parties in Maine and the vast majority of economists worldwide.

That is why last year I drafted a tax reform plan not unlike the governor’s current proposal and introduced it with four other Republicans, five Democrats, and an independent — called the “Gang of 11.” It failed, unfortunately, because although it had elements that were attractive to both parties, nobody wanted to take the bold action necessary to truly revolutionize Maine’s tax structure.

As the retired head of a Maine bank, former adjunct professor of economics at UMF, and the former chairman of the Maine Legislature’s Taxation Committee, I understand the importance of modernizing Maine’s tax code to grow the economy.

This is quite simply something that Maine must do if it wishes to jump-start its economy for the long term.

The only way it’s going to happen, however, is if Maine residents agree that Maine needs tax reform and if state lawmakers follow through.

Trust me, they will not act on their own.

If Mainers want more jobs and fewer taxes, they have to be willing to fight for them.

Gary Knight of Livermore Falls is a retired banker who served from 2006-2014 in the Maine House of Representatives. He was a member of the Taxation Committee.


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