Tax Flight — This Bird Ain’t Got Wings

According to a story on MPBN, Maine legislators heard presentations from the LePage administration today on LePage’s plan to reduce and ultimately eliminate the state’s estate tax.

Elimination of the estate tax will cost Maine $35 million a year in revenue and benefit fewer than 1 percent of all taxpayers.

In what isn’t exactly a new theme, LePage claims the estate tax is driving wealthy Mainers to migrate to other states.

Where is the data to support this claim, we’d like to ask?

Studies show that there are a number of reasons people relocate from one state to another and that few of them have to do with taxes.  A report from the Center on Budget and Policy Priorities states, “When people do relocate, a large body of scholarly evidence shows that they do so primarily for new jobs, cheaper housing, or a better climate.” 

Another report, “The Impact of Taxes on Migration in New England,” concludes, “The limited available research on the impact on taxes on cross-state migration suggests that taxes do not play a very important role.”

Even if taxes do sometimes affect out-migration decisions of some individuals in states like New Jersey, we’re guessing that is less common here.  It’s not like you can find
Maine’s unique mix of spectacular coastline, natural grandeur, and local culture anywhere else.

And, yes, the quality of local services and amenities is an important factor in decisions to relocate.  It doesn’t look like Maine communities will have much to offer in terms of services if LePage gets his way on estate and income taxes.

–Read more about this issue in today’s Bangor Daily News.

If it favors the wealthy, LePage Supports it.

Shift more of Maine’s tax burden to the poor and middle class? This will be the result if LePage gets his way and eliminates the state income tax.  As quoted in the BDN, a  2011 Maine Revenue services  study found eliminating state income tax would have the following effect:  “The bottom 80 percent of Mainers (incomes less than $86,789) would have an aggregate $223 million tax increase, while the top 1 percent would have a $183 million tax cut. ”

According to an Albert DiMillo opinion piece in the BDN, this added burden to the middle class would be on top of an existing situation in which Maine’s middle class already pay a higher proportion of their income to state taxes than do the wealthy.  Read the full article here.

The LePage “Tax Cut for the Poor” — A First Class Farce

The self-proclaimed signature accomplishment of the LePage administration has been the $433 million tax cut, which Paul LePage has often defended by stating it is a “tax cut for the poor.”

When challenged on his tax cuts, LePage is quick to bring up the 70,000 Maine residents who no longer pay state income tax due to legislation enacted in the last two years..

Thanks to figures from the Maine Center for Economic Policy, we now have a more clear picture of how much life has improved for those 70,000. Let’s imagine a twenty-something single female working 35 hours a week at minimum wage.  Thanks to the LePage tax cut, she now has a grand total of — get this — $7.00 per year of additional spending money.  Seven dollars.  Per year.  According to MHPC, those earning twice as much only benefit to the tune of $50.00 per year.  That’s one dollar per week.

Don’t spend it all at once.

The point is that the members of that nameless, faceless 70,000 were paying almost nothing in taxes to begin with.

So LePage has cut health insurance benefits, prescription benefits, and child care benefits for these folks, but hey, they have that extra $7.00 in their pockets, so they should be thankful, right?

The LePage administration tax cut for the poor is a first class farce — and nothing more.

To read more, please see Joel Johnson’s recent BDN opinion piece, “Maine’s Avoidable Budget Crisis.”.

Newsflash — Taxes Not Source of All that Ails Us.

A finance website, MoneyRates.com, has rated Maine 49th among the 50 states in terms of places to make a living.  According to the same site, Maine ranks nearly as poorly as a place to retire.  The really interesting part of this study is the finding that even if Maine’s income tax rate could somehow be reduced all the way down to zero percent, the state’s ranking would only climb 7 places to 42nd.

Maine’s geographical location, relatively low average income, and relatively high cost of living are the stated reasons for Maine’s low ranking.

Our takeaway:  the study confirms out belief that LePage is barking up the wrong tree.  Taxes, taxes, taxes.  The governor talks about little else.  Yet, if the above is true, even the most strident tax reforms can play only a very marginal role in the challenge of improving the economic landscape of our state.

Richard Barrington of MoneyRates also states, ” . . . Effort to promote the state regionally for its quality of life and relatively low energy and labor costs might be a better way to improve the economy than a strategy that aims only to lower taxes.”

If the study is correct, LePage should put taxes on the back burner and focus more attention on developing and promoting the positive qualities Maine already possesses — a quality environment and hard-working people.