Commentary

Maine Can Fund Education Without Taxing High Earners Out of the State

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We are going to miss Matt Gilman.

Chances are you don’t know him, but he lives in Alfred. He was born in Maine, and he raised a family here. He loves all Maine has to offer. “From wonderful eateries to a scenic hike in the pristine wilderness,” he calls Maine “the good life.”

But he’s leaving. Maine’s new law to impose a drastic tax on certain households was the last straw in what he sees as the state’s never-ending appetite for the tax dollars of hard-working Mainers such as himself. Unfortunately, he is not alone.

Maine residents and businesses are fleeing our state or considering it because of the passage of Question 2 last November, which placed a 3 percent surtax on households earning more than $200,000 annually to increase education funding. This gives Maine the dubious honor of being the highest taxed state in the nation on upper income earners — the people who invest in our state and provide jobs.

It’s a huge step back for Maine. Under Republican leadership, we have made great strides in reducing the state’s tax burden since 2010. In that time, the Legislature has enacted two separate tax cuts that represented the largest tax reductions in the state’s history. Together, they lowered Maine’s income tax burden by nearly 20 percent. By contrast, this new 3 percent surtax represents a 42 percent tax increase.

This month, some of Maine’s largest job providers gave chilling testimony before the Appropriations and Financial Affairs Committee about the impact of the new tax. Greg Wiessner, vice president and corporate securities counsel at WEX Inc., told the committee “this income tax surcharge will have the unintended effect of driving away talent at a time when WEX is growing.” He also stated, “This tax not only hinders our ability to recruit talent to Maine, it will also give our competition an edge in recruiting our associates away from Maine.”

Geoff Baur from IDEXX echoed those comments, saying, “The high tax rate makes it easier for out of state organizations to recruit our internationally renowned talent.” He also told the committee, “As IDEXX continues to grow, we want to attract, develop and retain talent in Maine, for the good of Maine, Mainers and IDEXX. The 3 percent surcharge works against that objective.”

In approving Question 2, Maine voters made clear they wanted more money for our schools. It was a reaffirmation of a referendum, passed in 2004, to increase public education funding by calling on the state to fund 55 percent of the cost of K-12 education.

It is clear that adequate education funding needs to be among our highest priorities, and not only because our schools need more money. I am certain many people on fixed incomes voted in favor of Question 2 because they were concerned about their ability to pay for local education costs. Higher property taxes are among the biggest worries elderly Mainers face in their struggle to stay in their homes.

But I do not believe it was their desire to punish Maine’s small businesses and discourage investment in our state.

It is incumbent upon the Legislature to find a solution. It is my hope we will give serious consideration to LD 571 sponsored by Sen. Dana Dow, R-Waldoboro, that would roll back the 3 percent surtax and increase education funding using other revenue sources.

Regardless of which path we choose, we need to remain mindful of the economic crisis that is already happening because of Question 2. A migration of Maine businesses and their employees out of the state will shrink the tax base and lead to an uncontrollable economic decline. That means less money for critical state programs — public safety, infrastructure and, yes, education.

In a letter to Maine’s political leaders, Gilman states, “It saddens me that I am going to have to leave this state. The tax burden is more than I am willing to continue to pay. I believe in paying taxes; they are, after all, a necessary evil. But the taxes in Maine, in my opinion, have become overly excessive. It is time to move and put Maine on the great place to visit, but not to live list.”

We cannot afford to lose more people like Matt and his family or Maine businesses. I believe the Legislature can find a solution that honors the spirit of what Maine voters were looking to accomplish without harming our economy. It is critical we reach an agreement on how to do that before adjournment in June.

This column was originally published by the Bangor Daily News.

About Mike Thibodeau

Michael Thibodeau, Senate President, represents Senate District 11 which includes Belfast, Belmont, Brooks, Burnham, Frankfort, Freedom, Islesboro, Jackson, Knox, Liberty, Lincolnville, Monroe, Montville, Morrill, Northport, Palermo, Prospect, Searsmont, Searsport, Stockton Springs, Swanville, Thorndike, Troy, Unity, Waldo and Winterport.

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