All Maine Matters

April 2006



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The Fleecing of Maine: Taxes and Fees Suffocating Mainers
By Rep. David Trahan and Rep. Jon McKane

During the past summer, Governor Baldacci and the majority party campaigned on the theme of having lowered your tax burden and reduced the state spending increase to record lows.

In this column we will begin to unravel truth from fiction. We will peel away the budget gimmicks and cast away the Augusta double talk. And we will make clear the hard and honest facts of exactly what your state government did to keep you the highest taxed people in the country.

It is important to understand that there are two state budgets. One is the overall state budget that includes all federal and state spending. It totals about $6.3 billion a year. Under federal law, our state auditor must complete what is called a Federally Mandated Single Audit for this budget. The audit insures that all monies are distributed to the proper agencies. Despite these controls, we can see by reading the Single Audit that some federal money can be “redirected.”

The Appropriations budget is different. This budget is the Legislature’s spending bill for all of the money collected through state taxes and fees. Totaling about $3 billion a year, this budget is a breeding ground for gimmicks and smoke and mirrors accounting. It is also the birthplace of special interest payouts. Unfortunately, even for the most experienced lawyers, it is virtually impossible to decode the dense statutory language, the endless numbers and countless pages of convoluted columns and codes.

Clever and experienced politicians in power know this. If they choose to, they can bury whatever they want in the mind-numbing miasma of spending and legal codes without detection. No one, including the press, seems interested in or capable of deciphering the schemes and gimmicks buried in Appropriations budgets.

Until now. After months of pouring over budget data supplied by the non-partisan Office of Fiscal and Program Review (OFPR) for the years covering the Baldacci administration, this is some of what we found:

The Governor and the Legislature have raised more than 83 different tax and fee line items totaling approximately $775 million. These include everything from the new slot machine taxes to increases in hunting licenses and commercial fishing licenses, and even a new $7 on-line fire permit. There were fertilizer fees, surcharges on pet food, the kitten and puppy tax, park fees, a dollar increase in the cigarette tax, and the “casual rental tax” (if you rent your camp to your sister for a month, you have to charge a new seven percent sales tax).

Moreover, there were 21 line items where the state failed to conform to Federal tax cuts. These total more than $185 million. It is state policy to conform to federal tax changes, but the Baldacci administration has decided it’s not convenient to do so.

Congress and President Bush have passed tax reductions to spur business and economic development, as well as to provide desperately needed tax relief. Citizens in other states are getting the full benefit of these cuts, but not the people of Maine. The tax cuts Maine has refused to adopt affect most people in the state. They include the “marriage penalty” tax, day care credits, higher education expense deductions, the death tax and student loan tax deductions.

Naturally, Maine always conforms – with blinding speed – when the federal government raises taxes.

In the Baldacci era, the majority party has found numerous other ways to separate you from your money. They include delays in state tax credits ($23 million), changes in exemption formulas ($6.7 million), an increase in state retirement annuities tax ($25 million over four years), three increases in the gas tax ($82 million), and a new tax on slot machines. One of the most repugnant new “revenue enhancers” is the hospital tax or “sick tax” of $263 million.

Several of these taxes, such as the gas tax and the sick tax, were not claimed as tax increases by the governor’s budget officer (that’s another gimmick we’ll explain later). If you don’t believe these are taxes, try not paying them. On second thought, don’t. There’s a new Maine Revenue Services “enforcement initiative” that includes hiring 31 more tax “enforcers” to help squeeze Maine citizens and small businesses. The cost of this initiative is $44 million.

The grand total of all tax and fee increases since John Baldacci won the Blaine House and through the end of his term – are you ready? – is $1.146 billion. And yet the Governor’s budget office claims to have raised taxes only $311 million. These kinds of tax and fee increases are like the proverbial “death by a thousand cuts” for Maine businesses and certainly have been suffocating the Maine economy.

For the first three months of 2005, Maine sales tax revenue fell 1.2 percent while the national average grew by 5.8 percent. Maine was one of only three states to experience such a decline. This is a symptom of an economy in distress. Hiding spending and taxes will not change that reality.

The fiscal year ended in the black, but only because several wealthy people in Maine died and the taxes on their estates made up for lagging sales. How pathetic – without the death of its citizens, the Maine government could not support itself.

In the next column we will explain more of the shell games and gimmicks the administration and its budget office, with an assist from the Legislature, are using to cook the books.

Rep. David Trahan, a fourth-term legislator from Waldoboro, is a woodsman. Rep. Jon McKane, a freshman legislator from Newcastle, is an electrical contractor.

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