Is the Democrats’ ‘better deal’ fair and balanced?

BDN photo by Christopher Cousins.

BDN photo by Christopher Cousins.

Cynthia: Under the Democrats’ new tax reform proposal, over 630,000 Maine households will pay less in taxes, while about 70,000 households — those making more than $150,000 per year — will pay more.

Sounds like a better deal for Maine, doesn’t it, Mike?

Mike: Yes, the problem with Augusta is that it doesn’t suck up enough money. We’ll tax our way to prosperity! But I have to ask: did you scare the Democrats by pointing out that the governor’s plan was less regressive than their 2009 plan? Is that what pushed them into tax hike mode?

Cynthia: What do you mean “tax hike?” The Better Deal proposes a lower sales tax compared with the governor’s proposal and reduces property taxes in addition to giving income tax relief to an overwhelming majority of Mainers. These middle class tax breaks are paid for by equalizing taxes on tobacco products, closing corporate loopholes, and eliminating itemized deductions for high earners, among other things.

The LePage plan creates a budget hole in the years ahead that will be filled by gutting public education and other services while the Democrats’ plan is fair, and they balanced the books.

Fair and balanced — and therefore likely vetoed if passed. The irony is killing me.

Mike: Talking points are fun. Remember when Democrats were “concerned” just a few short months ago about the elimination of itemized deductions? But now it is a good idea. And yes, the Democrats’ plan projects more money for Augusta than it would otherwise receive: a tax hike.

Tell me — how does the “Better Deal” improve opportunity for our capital-intensive small businesses in construction or manufacturing? They are taxed under the fiction that the owners pocket all the cash. If you buy a new excavator — which can cost hundreds of thousands of dollars — you don’t get a write-off. Instead you pay taxes on all that income, minus a percentage deduction. Do Democrats have an answer, or just talking points?

Cynthia: Oh, boy. The only thing worse than talking points are pesky job killers!

But seriously, if your point is about corporate taxes, the Democrats’ plan leaves the corporate tax rate the same as it is now. Most of Maine’s businesses are small — roughly 97 percent –and run by individuals who will still get their Schedule C business exemptions under the Democrats’ plan.

How does the governor’s plan help capital-intensive small businesses more than the Democrats’ plan?

Mike: A lower marginal rate helps small businesses more, since capital investment isn’t normally expensable in the year it is acquired. Lawyers and morticians may be recession-proof, but other businesses need to squirrel away profits in good years in order to weather the bad years. If they don’t, then the business will need that mortician and lawyer!

But let’s abstract for a moment. Democrats keep talking about making people pay their “fair share.” Is there a percentage of income considered “fair?” A dollar amount? When do we know we’ve reached it?

Cynthia: Fair. You know, just. Equitable. In the tax reform context, “fair” means distributing the benefits of a change in the law widely in order to help as many people as possible, and requiring those who make a lot more money and those from away to pitch in more than they do now.

We’ll know a fair system when we see it, just like we know the current system is stacked against middle-class families.

Small businesses need an educated and healthy workforce, reasonably priced insurance and energy, and high-speed Internet. Finding a place to hoard gobs of tax-free income is not a common problem for the common businessman.

Mike: So the Republicans need to negotiate until the Democrats “say when?” That’s going to make for a long few months in Augusta. But I think you’ll find a lot of agreement with the governor and other Republicans on the resources needed to succeed and grow Maine’s businesses.

Except that it costs money to hire an educated and healthy workforce, use those other resources and buy equipment to make it all work. Losing 40 percent of your income in state and federal taxes because of a fictional story is a good way to slow things down. If Democrats don’t think abolishing the income tax is a good idea, then let’s get Washington on board, drop the talking points, and really reinvent the system. You in?

Cynthia: Well, of course I’m “in.” Look at me! I’m sitting here writing about tax reform instead of watching “Downton Abbey” or surfing with sharks and morticians.

When the system is fair, you won’t feel like you are “losing 40 percent of your income.” You’ll believe that the taxes you pay are a fair price for the roads, public safety, parks, libraries, schools and other services in your neighborhood. Unless of course you expect something for nothing.

Mike: Freebies are more your side of the aisle. But sure, I’m for all those things. However, let’s also bring back that old Yankee frugality and re-learn to stretch a nickel; the solution to every problem doesn’t need to be more government spending. Then we can have taxes that are low, consistent, and “fair.”

Cynthia: A better better deal for Maine? Fair enough.