Politics

September 10, 2012

Truth Test: King ad right on tax decrease, dubious on bond rating

By Michael Shepherd mshepherd@centralmaine.com
Staff Writer

"As governor, he lowered taxes, fixed roads and schools, protected open spaces and got the highest bond rating ever."

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On the Angus King ad's claim that he lowered taxes while governor

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On the claim that Maine had the highest bond rating ever while King was governor; and for the ad overall

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ABOUT TRUTH TEST

TRUTH TEST is a feature of MaineToday Media's campaign coverage in which we cast a critical eye on the truthfulness of advertising and public comments by political candidates and groups.

-- First television campaign ad for independent Angus King, a candidate for the U.S. Senate

This introductory ad for Angus King, the former two-term independent governor, isn't chock full of detail. This sentence is the only one that makes factual assertions, and they're careful and general.

Two of the four claims, the ones involving roads and schools and open spaces, are too general to check. Any politician can say they helped those things and probably get away with it.

We'll be Truth Testing his first claim and last claim -- that he lowered taxes and presided over the state's highest-ever bond rating.

'LOWERED TAXES'

There's no politician who hasn't boasted of lowering one tax or another, so we're going to hold King to a large burden of proof -- not just a few decreases, but Maine's tax burden over his tenure as governor, by two separate measures.

First, a Maine Revenue Services document detailing the net estimated effect of "significant" King-era tax increases and decreases and their impact in fiscal year 2003. The sheet says nearly $429 million was saved in taxes because of changes enacted between 1995 and 2003.

Of these, the two largest tax decreases were the repeal of the hospital assessment tax by the 117th Legislature, in office from 1995 to 1996, and the two-step lowering of the sales tax from 6 percent to 5 percent by the next two legislatures.

In all, those decreases took more than $300 million out of state coffers in the 2003 fiscal year.

The largest tax increase was the 118th Legislature's doubling of the cigarette tax, from 37 cents per pack to 74 cents. That gained the state nearly $38 million in revenue, the sheet says.

Second, we'll look at another Maine Revenue Services measure of taxation -- a 2011 incidence study that measured Maine's effective state and local tax rate back to 1996.

It said that in 1996, King's second full year in office, Mainers paid just over 11.8 percent of income, including capital gains, in state and local taxes. In 2002, King's last full year in office, that rate had dropped to under 11.5 percent.

That isn't a perfect measure, as tax collection can shift with the health of the economy, but paired with the net tax decreases in the other Maine Revenue Services document, it provides compelling evidence for King's claim.

"We would argue that over the King administration, at least from 1996 through 2002, the tax burden decreased," said Michael Allen, associate commissioner for tax policy at Maine Revenue Services.

Verdict: All evidence collected points to a large impact on Mainers' wallets from changes enacted during the King administration. With a net and percentage-wide decrease, we've got no problem with the claim.

We rate this statement true.

'HIGHEST BOND RATING EVER'

This is true -- if you look only at one of the three credit rating agencies that have reviewed Maine's general obligation bonds. This agency has also been rating Maine since 1996, while the others have been for decades.

We'll look at Maine's total rating history before 2007 and compare King-era numbers to numbers from before then, using a sheet provided by Grant Pennoyer, director of the Maine Legislature's Office of Fiscal and Program Review.

(Continued on page 2)

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