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GEORGE SMITH: Cutler’s unpopular tax talk raises level of economic debate

While we can’t get enough of the rich and famous, we want to tax them into poverty. Unfortunately, many of our arrows aimed at the rich are boomerangs.

Maine is particularly punishing to the rich, but as usual, we manage to wound ourselves whenever we take aim at them.

Our highest tax rate, a confiscatory 8.5 percent of income, kicks in at just $19,451 for a single person.

Now I know that many Mainers are capable of sustaining themselves, harvesting and heating with their own wood, eating and preserving home-grown vegetables, raising or shooting and butchering their own animals, and therefore able to survive on $19,451 a year. But none of them would be mistaken for a rich person. Yet the same high income tax rate applies to both.

And it gets worse because the rich are clever enough to maximize their deductions with help from a battery of accountants and lawyers — if they don’t just up and leave for more tax-friendly states.

The rest of us — anchored here for one reason or another — get only a few deductions that are easy to understand and claim: for example, the deduction for interest paid on mortgages.

One of the reasons I was uneasy about the tax reform package that Mainers repealed in June was that it eliminated the mortgage deduction in favor of a tax credit that I did not understand. The credit looked to me like something the governor and Legislature could easily change.

Everyone seems to recognize that Maine’s income tax must be reduced: GrowSmart Maine in its Brookings Report, the Maine Chamber of Commerce’s “Making Maine Work” report, and past and present governors and legislators who have struggled for years to address this obvious problem without solving it.

And it’s the year of the angry voter who is tired of high taxes and ready to take out that anger in the voting booth.

So it was no surprise when Republicans sharply criticized Independent gubernatorial candidate Eliot Cutler for comments indicating a tax cut in the next two years for Maine’s hard-pressed citizens is unrealistic.

Cutler is right, but perhaps politically unwise, to be offering such frank statements in a political campaign when most people want to hear a more hopeful message, no matter how unrealistic.

There are two obvious obstacles to tax reductions in 2010 or 2011.

First, state government faces a staggering $1 billion deficit — coming after Gov. John Baldacci and the Legislature reduced expected spending over the last few years by $1 billion. And even after those substantial and unprecedented spending cuts, they still had to increase taxes, including a very aggravating decision to reduce the property tax homestead exemption and shift more of their problem to municipalities.

Second, political leaders will be unwilling to tackle tax reform — the first step toward real tax relief — after the June repeal of their far-reaching reform package that reduced income taxes and extended the sales tax to many more items and services. That reform package took years of work and a lot of compromises, and few veteran legislators are eager to tackle the issue again anytime soon.

I contacted Cutler to find out what he was really saying and thinking and found his reasoning hard to refute.

He intends to “squeeze” all spending down, hard, including an examination of all $3 billion of tax exemptions — tax breaks that individuals and businesses enjoy. He expects to find many of those tax breaks to be unjustified and not contributing to our economic well-being.

Once he’s got spending under control — and he is giving no timetable for that prodigious task — he’ll be ready to tackle major structural tax reform, with a top priority of cutting the marginal income tax rate by 50 percent. He’s also talking about looking at alternatives to taxes.

We’ll get the job done, he says, only with a “statewide conversation” — but we can’t even get that far until “we prove spending can be controlled.” Hence his conclusion that taxes can’t be reduced in the next state budget.

One fact is undeniable, and Cutler mentioned it in our conversation. Without significant economic growth, Maine will continue to founder, chasing unrealistic promises and suffering the consequences.

Cutler may never be governor — his candor is a real barrier to electoral success — but he’s doing us a favor — and raising the level of debate in this election — by talking the truth. I expect he will continue to be punished for it.



George Smith is executive director of the Sportsman’s Alliance of Maine. He lives in Mount Vernon and can be reached at george@samcef.org.