Analysis: Maine's Private Sector Still Lags the National Average


by Scott Moody

Maine’s private-sector share of personal income for 2011 has begun to recover from the all-time lows set during the “Great Recession,” but that growth is still 6 percent smaller than the national average.

Maine’s private-sector share of personal income is now 65.5 percent, compared to 69.3 percent nationally.

The U.S. Department of Commerce’s Bureau of Economic Analysis on Tuesday released new personal income data for 2011 by state and revisions for the past couple of years. After rising only 3.7 percent in 2010, state personal income rose an average of 5.1 percent in 2011, according to the Bureau of Economic Analysis.

State personal income growth ranged from a low of 3.4 percent in Maine to a high of 8.1 percent in North Dakota.

The chart shows that as the gap in private-sector personal income between Maine and the national average has grown, so has the gap in per-household personal income. Most recently, between 2010 and 2011, Maine’s per-household personal income grew at only 0.2 percent, while it grew nationally at 1.6 percent.

Maine’s income in 2011 stood at only 81.6 percent of the national average, which is one of the lowest levels ever.

To get Maine’s income up to the national average, policymakers need to first breathe new life into Maine’s private sector. The best way to accomplish this goal would be to eliminate the personal income tax—since many of Maine’s businesses structured as a sole-proprietorship, LLC, partnership or S-corporation file through the personal income tax.

Some relief to Maine’s business community is already on the way in 2013, when the top marginal income tax rate is set to fall from 8.5 percent to 7.95 percent. That is a good start, but policymakers need a much more aggressive approach to make Maine a more attractive place to live and do business.

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Scott Moody is Chief Economist of The Maine Heritage Policy Center