The amorphous idea of cutting Maine’s income taxes – as floated by Gov. John Baldacci – is out of character for an administration that has tightly guarded its major policy goals and proposals.
School consolidation is a perfect example. Almost without warning, the governor and his administration dropped this idea on lawmakers to start the 2007 session.
This practice has also led to criticisms of working in the dark – on county jails, for example – but regardless, it’s clear this administration never, or rarely, fails to do its due diligence.
Until now. Gov. Baldacci has professed desire to cut the top income tax rate of 8.5 percent, one of the country’s highest. Even with the Tax Foundation’s rosier view, income taxes remain Maine’s ugly blemish.
The cut is a terrific idea, on the surface. (What tax cut isn’t?) Reducing the tax rate should, in theory, provide an economic boost, especially here, where average wages and salaries lag behind the bulk of the nation.
It could put more money in pockets of people who already don’t make enough.
But this is just an idea, not a full-fledged plan. Gov. Baldacci has said this cut wouldn’t correspond with increases of other taxes, like the sales tax, and hinted lost revenue would be offset with further cuts to state spending.
This sounds almost too good to be true – so cue the warning flags.
Maine had a nice budget surplus in 2007-2008 of about $56 million, based on greater-than-anticipated revenue from – you guessed it – income taxes. But 2008 revenues from income taxes are slowing.
Mal Leary, of the Capital News Service, reported July 22 that June income tax collections missed the mark by $879,000. Rising consumer expenses also have officials wary revenue might continue to worsen.
Some estimates have Maine realizing a shortfall of $400 million in its next two-year budget.
This sure doesn’t make it seem an opportune time to cut income taxes, but, as the governor’s chief spokesman, David Farmer, was quoted recently as saying, “There’s never an easy time to do big things.”
That’s so true. But if past history is any indication, Gov. Baldacci rarely attempts “big things” without a plan.
Income taxes have been high for years. So now, with future finances frosty, the governor floats a cut?
There must be more to this than meets the eye.
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