Should Maine have the second highest tax rate in the nation? Higher than New York, Massachusetts, Connecticut, Virginia, Oregon, Hawaii, Wisconsin…everywhere except California?
It is a simple question. If you say “no,” then you have your answer for Question 2 on November’s ballot.
Even better, you can count yourself among the motliest crew in Maine politics — it includes Gov. John Baldacci, Gov. Paul LePage and the Bangor Daily News\. Who would ever have thought they’d all agree on something?
The reason they are all on the same page, along with groups like Educate Maine, the Maine Dental Association, and the truckers of the Maine Motor Transport Association, is because Question 2 will almost certainly damage our economy.
It is ironic this proposal comes forward at the exact same time the University of Maine is proposing a new, unified professional education center. Eliot Cutler led the feasibility effort on the “Maine Center,” and the University system trustees accepted his plan this week.
Put simply, the goal of this new initiative is to create tomorrow’s workforce for our state, a workforce ready, willing, and able to start and lead organizations. And guess what? Those jobs might lead to a household income exceeding $200,000.
Those families will need to decide whether it’s worth staying in Maine with a 10.15 percent tax rate on income over $200,000 — if Question 2 passes. If they head to the Green Mountains of Vermont, it drops to under 9 percent. Or if they move to North Conway in New Hampshire, their income tax bill drops to $0.
Yet we don’t need to wait for Cutler’s new graduate center to see these effects. Look at the proposed medical tourism center in Auburn. To be successful, they will need to hire renowned surgeons and doctors to draw those tourists in. And, if it gets off the ground, that success will beget further success, creating other jobs in the organization: nurses, pharmacists, administrative staff, skilled trades, and numerous others.
But it starts with attracting talent. An average plastic surgeon earns over $350,000 annually; the best make a lot more. If they decide to come to Maine, they will probably buy a house and a vehicle, eat at restaurants, give to charities. Yet they’ll have to stomach what could be a $30,000 income tax bill for the privilege of living here should Question 2 pass, $12,000 more than if they chose somewhere in Massachusetts.
Or look at sunny South Portland and Maine’s own Fairchild Semiconductor. With its recent sale to ON Semiconductor of Arizona, the company will likely look at integrating and streamlining their operations. Part of that decision is where the leadership — all almost certainly making more than $200,000 — and administrative team will be based. Do they choose Arizona, with its famous “dry heat” and a 5.6 percent income tax rate? Or do they decide on beautiful Maine, with Question 2’s 10.15 percent levy?
These examples look only at wage earners. But the dark secret of Question 2’s income tax hike comes with whom it hits. Maine Revenue Services estimates 16,000 families will be hit with higher taxes. Only 5,000 of them are doctors and other professionals, earning high wages.
The remaining 11,000 are small Maine businesses who report all their income as if the business owner pocketed it. But, of course, they don’t. They take their profits and put them back into the business — expanding stores, buying new equipment, hiring new employees. Whacking them with a 10.15 percent tax rate will slow that growth down, slowing our economy.
At first blush, Question 2 sounds great — let’s help schools. But both Maine’s tax code and our educational funding edifice are antiquated. That is why, even if Question 2 does pass, over 100 Maine communities won’t get a nickel more.
Live in Blue Hill? Bupkis. Lincolnville? Nada. Vinalhaven? Zero. But Cape Elizabeth will get $2.5 million and Scarborough will get over $5 million, more than doubling their cut from state taxpayers.
The best way to bolster Maine’s education system is to build a better economy. With a stronger economy and a reformed tax system, we can focus on real education reform spending each dollar wisely. Simply jacking up our tax rates to the second highest in the nation and throwing more money in the hopper isn’t a sustainable, long-term solution.
So stick with the motley crew — Baldacci, LePage and the BDN — and say “No” on Question 2.