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All Maine Matters

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Vol. 1, No. 10      October 2006 FREE

The Real Question: What Will Happen If the Taxpayer Bill of Rights Doesn’t Pass?
by Pem Schaeffer

Some years ago, Wayne Gretzky, “the Great One” of NHL hockey, was in a TV commercial. In it, he said the secret of his hockey success was that instead of skating to the puck, he skated to where the puck will be.

I remembered this as I thought about the Taxpayer Bill of Rights. Committed proponent that I am, I won’t tell you that passing it will reduce the taxes we pay now. It does not “skate” to where our tax burden is. Instead, it is designed to address how our tax burden will grow under the status quo. It “skates” to where our tax burden will be.

We’re being bombarded by the organized and richly financed forces of opposition to this true citizen’s initiative. Their campaign of fear, uncertainty, doubt, and deception is based on frightening predictions of doom and gloom if the Taxpayer Bill of Rights passes. Given the state of our state, it’s far more important for voters to consider what will happen if it doesn’t pass.

Let me explain why. Kit St. John, and the Maine Center for Economic Policy (MECEP) that he heads, are the theological ground zero of the anti-Taxpayer Bill of Rights coalition and the religious devotion to big government that drives them.

St. John and his fellow travelers repeatedly emphasize two points about taxes in Maine. First, that claims we have a very high tax burden are false, no matter how many national organizations document the facts and compare all states in this regard. They argue that our state and local tax burden, ranked number one for the last decade or so, is reasonable and appropriate, and that we should stop complaining so much. Second, St. John mourns that Maine’s lower income population pays a greater percentage of their income in taxes than do upper income taxpayers. It seems intuitively obvious that lower income residents pay a greater percentage of their income for a gallon of gas (and the taxes on it), a quart of milk, and a pack of cigarettes (and the taxes on it) than do higher income taxpayers. It’s true in every use of their incomes. That is why people try to better themselves and make responsible choices in their lives; so they have more discretionary income.

These two points of theirs, coupled with the genetic makeup of the sprawling non-profit sector that dominates the political scene, set the stage for assessing our future. I am convinced that while our current tax burden is already oppressive, and has clearly devastated Maine’s economy and demographics, it’s where the non-profit sector will drive our tax burden that should terrify taxpayers and voters.

For sake of argument, let’s assume that Maine’s current local and state tax burden is 13%, a figure that appears in any number of reports and compilations. I will here assert that St. John and his colleagues would like to see that figure raised to something like 18 to 20%, or an increase of our tax burden by nearly 50%.

Why do I think this? Because of the very nature of the non-profit industrial complex headed by St. John, Anna Marie Klein, Joe Ditre, and all the rest. They make their livings asserting that critical services and social needs are going unfunded, and that as a result, “social and economic injustice” is rampant across the state. They constantly lobby for more spending at the state level for all sorts of new program, and expansion of existing ones. Their wishes know no bounds.

And I’m influenced by what I have witnessed at the local municipal level as well. I’ve watched school and town spending increase an average of nearly 6% a year, and sometimes as much as 9 or 10%, while those who do it mourn that “vital needs” are going unmet and necessary expenses deferred. Their appetite seems to know no bounds, and that is especially true of school authorities.

Combine these two effects, and you have a very noisy band earning their living by banging out a loud and incessant drumbeat for more and more spending, taxes be damned. After all, they say, our taxes aren’t as high as we think they are.

Here’s a scenario I can envision if these forces of spending growth have their way, Baldacci is re-elected, retains his senate and house majorities, and in particular, if the Taxpayer Bill of Rights does not pass. After the failure of the prior property tax referendum, the forces of big government expansion will believe they have a mandate.

State Income Tax: We’ll see a total restructuring of the rates and brackets. In keeping with St. John’s concerns for lower income residents, the brackets will be realigned so that the lower 50% of Maine residents pay no state income tax at all, and the lowest quarter actually receive a “refund” (or income transfer) even though they paid no tax to begin with.

esidents in the upper half will find themselves taxed at 6% at the lowest bracket, 8% at the next bracket (up to $60,000, let’s say), at 10% in the next bracket (up to $100,000 let’s say), and at 12% above that level. Incomes over $100,000 will have their deductions limited, and those over $150,000 will have them severely limited, raising the effective tax rate even higher. (A nifty trick that allows rates to seem artificially lower.)

State Sales Tax: Democrats have been itching for several years to both raise the sales tax and broaden its base to include most goods, and services like haircuts, dentistry, undertaking, legal counsel, and psychotherapy. Several years ago, they were claiming that such changes would nearly double sales tax collections, which are currently in the $1 Billion annual range.

Doubling collections would provide major revenue for program expansion and creation. In keeping with St. John’s concerns for the lower half, once again, they would be compensated for the increase. Via the income tax filing process, residents who earn below a certain amount would receive a credit for sales tax paid, and since they owe no income tax to begin with, this credit would take the form of a larger “refund” when they file.

Miscellaneous State Taxes and Fees: These include the gas tax and auto registration, among hundreds of others. Since the Baldacci spending juggernaut has had no trouble raising these taxes by over $1 Billion during his first term, without so much as a whimper from the public, or reporting by the media, there’s every reason to believe that once he and his majorities are secure in his second term, they’ll repeat this scenario with a similar new round of “no tax increases.”

Local Taxes: First, look for auto excise tax rates to increase, since this tax is seen as “progressive,” and because “critical local needs” can’t be met without the increase. And then look for a ramp up of “local option sales tax.” They’ll say it increases revenue “mostly on out of staters”, and will insu late Baldacci and friends from any responsibility.

It’s not too long ago we all began paying 7% sales tax on cups of coffee, meals out, and lodging, and the public rolled over easily on that. But remember: 7% here, 7% there, and pretty soon you’re talking real taxes.

As for property taxes, they will continue to rise largely unabated until the political class senses that a breaking point of resistance is approaching, and it threatens their jobs. Then they’ll come up with “son of LD 1,” a shifting/shafting facade of “more historic tax reform” that will lull all but the most informed back into their 24/7/365 slumber.

Through these and numerous other “revenue enhancements,” the forces of “justice” and social concern can reasonably expect to increase our tax burden to “notches unknown,” as a famous TV chef likes to say. And we’ll know the reforms offered by the politicians are nothing of the sort when the Maine Municipal Association, the MECEP, the Maine Council of Churches, the teachers union, and all the rest campaign for them, and somehow, never rise to the point of moaning over how the “tax reform” will make victims of the children, the elderly, and the other usual identity groups. Just like they supported LD 1, because they knew it wouldn’t harm their agendas one bit, and it played good on TV and in the papers.
If you think Maine’s economy and population profile is being devastated by the tax burden we have now, just imagine the “scorched earth” that will result if the tax burden is allowed to grow without a reasonable and effective limit on spending growth. The Taxpayer Bill of Rights was initiated to address exactly this concern.

The above, obviously, are my personal predictions, based on experience studying state and local budgets and taxes, and how they are manipulated, for years. No doubt St. John, Klein, Ditre and the other usual suspects will claim foul.
Fine. All they have to do is publicly declare that state taxes and local taxes should not go any higher, and that enough money is being “invested” at all levels to meet the needs of “social and economic justice.” Doing so, of course, would amount to admitting that they should close up their respective shops, since there is no additional government growth to advocate and lobby for.

But if they won’t give that public affirmation, then they should tell us just how much higher they think our tax burden should be allowed to rise, and what they will recommend as the tripwire, and the mechanism we’ll use to stop the tax burden growth.

To recap, in spite of the gloom and doom predicted by big government advocates if the Taxpayer Bill of Rights passes, your vote should not be influenced by thee fear, doubt, and deception they broadcast. The current political ruling class, and the army of non-profits who have their way with them, are frightened and desperate, and they will do anything to preserve their power and their control over our future.
Instead, your vote should be influenced by how much our tax burden will increase if the Taxpayer Bill of Rights doesn’t pass! That is really a frightening thought!

Change the balance of power in Maine; vote yes on Question 1, the Taxpayer Bill of Rights, and yes on restoring economic health to our state. Vote yes for your say in our future.

 
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