Trust. Good faith. Compromise.
Ha! Not when it comes to tax policy and Gov. Paul LePage.
I’m going to let you in on a little secret. LePage has no real interest in tax reform, and Democrats have zero incentive to play along with complicated schemes that shift taxes toward working people and give breaks to the wealthy.
In 2009, Democrats worked in good faith to develop a tax reform plan that rebalanced the books. The sales tax was broadened so that more services, in a service-based economy, were taxed and income taxes were lowered. It also included elements to help low-income families.
While the plan had winners and losers, the goals were noble and because it promised the Holy Grail of Republican goals — reducing the income tax — it should have been able to win broad, bipartisan support. It did not.
Instead, Republicans waged jihad against the tax reform package, successfully repealed it at the ballot box and hung the policy around the necks of Democrats for several elections to come, even tagging Democrats who never supported it with the sin.
It was a lesson in hardball politics that I will never forget. No policy — no matter how sound on paper — is worth a dang if you can’t defend it politically.
That’s part of the reason why LePage’s budget and his efforts to change the state’s tax code are doomed.
First, his ideas are a political disaster. They would result in higher property taxes and expanded sales taxes for the promise of lower income taxes. But — and there’s always a but with tax policy — the majority of the benefit of those reduced income taxes go to the wealthiest people in the state.
Second, voters implicitly rejected his model in November (and in 2010), when they approved a surtax on high income earners to fund K-12 education, which is the primary driver of property taxes.
Under LePage’s plans, which include the elimination of the Homestead Exemption for people younger than 65, homeowners would take a bath.
According to the Maine Center for Economic Policy, a left-leaning think tank, 912 families in Millinocket would see their property taxes skyrocket by $593 per year. It’s a similar story around the state, as property taxes go up an estimated $300.
Meanwhile, the top 1 percent of earners would see their tax bills go down by an estimated $23,000. That’s almost as much as someone earns in a whole year if they work 40 hours a week at $12 an hour.
Finally, even if his ideas were good — and they’re not — for LePage to successfully change the tax code, he’d have to find a way to work successfully with Republicans AND Democrats in the Legislature.
Fat chance. Just this week, the governor called them irrelevant.
There are mantras that stick to any debate about tax policy: Tax reform should be revenue neutral and the tax code shouldn’t pick winners and losers.
Poppycock. Both are nearly impossible.
If you change the mix of taxes, you can pretend they are revenue neutral in the first year, but the numbers will change, just as the economy changes. Sales go up, unemployment fluctuates, consumption patterns change, real estate markets expand and contract.
And any time you change taxes, someone will benefit and someone else will pay, either out of pocket or with reduced services. Lower income taxes benefit people with high incomes while shifting costs to homeowners through property taxes and to low-income families by raising sales taxes.
If you want to change the tax code but want it to be revenue neutral and not pick winners and losers, turns out you really don’t want to change the tax code.
Property taxes should be the top priority for lawmakers.
Property taxes do not necessarily correlate with ability to pay. They hit people on fixed incomes the hardest, and they are a hindrance to homeownership, which is a laudable economic goal and source of security for families.
But if you think that property taxes should be the focus of any reform — and that the state should do a better job of funding its obligations for education, which voters said they wanted — then the governor’s tax plan is going in the exact opposite direction.
For LePage to be successful, he’d need to build trust with lawmakers, work in good faith and be willing to compromise. No chance.
At this point, LePage’s tax proposals and budget are little more than campaign documents (perhaps thinking about 2018?), placed into the record so he can talk about the evils of taxes and welfare.
With the state budget firmly in the hands of the Legislature, it’s the governor and his voter-rejected ideas that are irrelevant. The job of seriously governing falls to others.