December 18, 2013

Other ways to erase state’s $40 million budget shortfall

LETTER

As expected, the state Legislature once again is competing with the U.S. Congress for ineptitude in solving budget problems. Maine suffers from an absurd, complex and ineffective mix of tax breaks and revenue sources. A work group of legislators, intent on producing a roadmap for tax reform, has failed to produce a plan that would gain compromise approval in the Legislature.

Reducing tax breaks and incentives for businesses, including big-box stores, could yield $64 million, more than enough to fill the budget shortfall of $40 million. That would be reasonable because big-box stores would not leave the state if they lost their state welfare money.

Current research shows, for comparison purposes, Florida collects 14.8 percent on tourism spending, Tennessee 16.3 percent and Maine just 11.9 percent. (http://traveleffect.com/economy#me) If Maine increased receipts from tourism by just 2 percent, based on tourism spending of $3.2 billion, the state would receive an additional $64 million.

Maine rates an F among the above three states for (high) worker benefits costs (including workers’ compensation). “Business taxes, Individual Income Taxes (both on workers and small business), sales, unemployment, insurance and property taxes all play a role in assessing regions for a potential, employer location,” according to Ball State University, Center for Business and Economic Research. Florida and Tennessee, rated higher, both have low property taxes and no income tax. Those two factors encourage business relocation to those states. Clearly Maine income taxes and high property taxes discourage business relocations to Maine.

The cost of living in Maine is 109 percent higher than national average and is largely caused by high property taxes. That should be a guiding light and impetus for tax reform. But don’t expect compromise in the state Legislature on the above-mentioned areas of opportunity. It is just too easy to heap the $40 million onto already unbelievably high property taxes.

Jim ChiddixWaterville
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