Democrats' budget plan: $400 million tax hike

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Dem Presser
Senate President Justin Alfond, D-Portland, and House Speaker Mark Eves, D-North Berwick, unveiled proposed tax increases on Wednesday.

AUGUSTA – Democratic lawmakers announced on Wednesday an alternative to Gov. Paul LePage’s five month old budget proposal that includes more than $400 million in tax increases.

Senate President Justin L. Alfond (D-Portland) and Speaker of the House Mark W. Eves (D-North Berwick) proposed their tax increases during a State House press conference. The plan is outlined in a letter from the Taxation Committee to the Appropriations Committee.

According to the letter, the Democrats’ final budget recommendations include delaying two tax code changes enacted by the 125th Legislature: a reduction in the income tax and an increase in the amount of property exempt from the estate tax.

The estate tax – also known as the “death tax” – is levied on deceased individuals’ estates before any inheritance is dispersed. Republicans in the last Legislature doubled the amount of an estate that is exempt from the death tax from $1 million to $2 million.

Democrats estimate that delaying this increased exemption until at least 2016 will raise $60 million over two years for the state. According to Democratic estimates, repealing the income tax reductions until at least 2016 will raise $350 million in revenue for the current biennial budget.

All told, the “recommended solution” the Democrats have put forward will mean taxpayers pay $410 million more in order to help balance the state budget.

The top four Democrats in the Legislature – President Alfond, Speaker Eves, Senate Majority Leader Seth Goodall (D-Sagadahoc), and House Majority Leader Seth Berry (D-Bowdoinham) – all voted in favor of the same tax policy they are now proposing to delay or repeal.

The Democratic proposal also includes a list of “other options” which they say could serve as alternative budget-balancing measure should repealing the LePage tax cuts prove impossible. The Democrats stressed, “It is not the majority report members’ proposal that all of these options be enacted. Instead, our strong preference is our recommended solutions.”

The optional parts of the proposal include the following: raising the meals and lodging tax to 9 or 10 percent – a move Democrats estimate will raise $120 to $180 million over two years; raising the sales tax to 6 percent, which is projected to increase revenue by $150 per year; and doubling the current cigarette tax, an increase of $1.50 per pack.

In addition, the Democratic proposal recommends enacting “tax equalization,” as outlined in Rep. Berry’s L.D. 1113. Berry’s bill, known in the State House as the Berry-Buffet bill for its similarity to a tax idea espoused by billionaire Warren Buffet, would hike taxes on the “top 1%” of Maine’s income earners. There is not currently an estimate of how much revenue this proposal would raise, but there is general agreement that less than 6,000 Maine residents would pay additional income taxes under the Berry-Buffet rule.

Alfond and Eves said raising taxes is necessary to produce a balanced budget without raising property taxes, but there seems to be some confusion of the Democrats’ part regarding which level of government administers which taxes.

They alleged that the governor’s budget increases property taxes; however, only municipalities have the authority to increase property taxes.

This is not the first time Democrats have baldy asserted that LePage is raising property taxes, and it may be part of a Party-wide strategy to weaken the governor by misconstruing his budget proposal.

Although municipalities could respond to the governor’s proposed biennial budget by raising property taxes, reducing spending is an equally viable way to respond to the suspension of revenue sharing. In no case does a governor have the authority or capacity to raise property taxes.

S.E. Robinson
Maine Wire Reporter
srobinson@mainepolicy.org

15 COMMENTS

  1. Perhaps Robinson will provide a quote or two of a Democrat “baldy assert[ing] that LePage is raising property taxes.”

    Because if you’re going to claim that they have, it usually helps to have some evidence that shows that they have.

  2. Your closing comment is basically BS, and towing this line will hurt republicans in ’14. It makes conservative and Republicans sound like children.

    True, as an absolute fact the Gov. is not signing the warrant to raise property taxes.

    It’s also an absolute fact that cost shifting is not savings, and that’s what the Gov is proposing in a substantial way. More importantly, calling cost shifting savings is a lie.

    Savings is saying we don’t need to spend that much, or we don’t need to spend it at all, year over year. It takes leadership to propose actual reductions in that way. It’s a cop out though to simply pass the buck to the municipalities and claim a savings. It’s not what I expect from the Gov. when I voted from him and it’s not leadership.

    An example of this cost shifting is forcing the local school districts to pickup the costs of teacher retirement after decades of running it through the state. This shift does not save tax payers a dime, in fact it’s likely to raise taxes for some. It does reduce the expenditure side of the state budget though, but those costs will be picked up by the local municipalities, and that means property taxes. My local school district had a nearly 400K increase to it’s budget due to this.

    A couple of months ago I attended a public hearing where the teacher retirement issue was discussed, and a rep from the Gov’s office kept talking about areas where the Gov was sure municipalities could save huge sums of money. The single example presented was of two larger cities who the Gov. felt could consolidate assessing services and save somewhere around a million dollars. Now it may be a fact that those cities could realize that kind of savings, but it’s absolutely none of the states business how a town or city does business (it’s a local political issue and should remain so), also potential savings at the municipal level should not be the bases for state budget decisions, and to a much larger point, most municipalities in the state are tiny and the amount of potential savings is equally as tiny because those small towns tend to be very frugal. So the burden of the proposed cost shifting remains a burden because many towns do a good job of running a tight operation to begin with. Those areas that try to offset the burden often do so by cutting something worthy of funding like maintaining town infrastructure and services.

  3. You make some excellent points. As a Selectman in a small town (Windsor), we try very hard to run a tight ship and be frugal. the same cost shifting occurred with the School Consolidation scheme during the previous administration. They assumed savings and took that money right out of the States budget but the schools (and towns) still had to spend the money to run them. The problem this time around is that the folks in charge can not even find $1 to cut in spending and they ALWAYS see tax cuts as loss of revenue (expenses) as though they were entitled to our money. They would have more credibility if they would propose some cuts to go with their other proposals.

  4. Mr Jones, you say reducing spending as a way to balance the budget is BS? If that’s the case, then please explain to me how the Dembiciles plan to shove a massive tax increase down our throats, with a corresponding massive increase in welfare spending is
    affordable or sustainable? We find ourselves in this budget crisis directly because of 40 plus years of Democrat mismanagement and incompetence.

    I am an elected member of the Sabattus Budget Committee and we were able to hold the line on spending and save our taxpayers more of their hard earned money.

    Apparently that’s a concept that completely escapes the Dembicile leadership.

    It’s amateur hour in Augusta. These people have no clue as to what they’re doing.

    And Dirigo Blue, let’s hear your plan for righting our economic ship.

  5. I never heard of the Dembicile Party…Why can’t you refer to the Political Parties in a respectful manner…whether they are Democratic or Republican, they are all part of the Governing Parties of our Government…I realize you are a Republican because your Ranting is always against Democratic Ideas, and the Republicans can do no wrong…unfortunately they do things wrong also, but I never hear you running off ranting about anything they do…when I read the BS you put out I always keep that in mind and remember where it is coming from…Please do enjoy your day…

  6. It is getting so neither party deserves respect; they both want bigger, more expensive government, albeit for different reasons – none of which are worthy of consideration! We need a return to individual responsibility, a FREE market, and a sane group of people in the Capitol.

  7. I believe Eddie VanHalen coined the word:

    “This is what happens when you give a Dembecile a postition
    of power which transcends his rational faculties; he starts
    babbling like a coked-up Capuchin with no regard for whether
    his spittle-strewn prattle contains any truth. A mind is a terrible
    thing to waste on a Dembicile.”

  8. While State government does not levy local property taxes it influences them with this:

    “Our division is responsible for the determination of the annual equalized full value (State Valuation) for the 489 incorporated municipalities as well as for the Unorganized Territory. The State Valuation is a basis for the allocation of money appropriated for State general purpose aid for education, State Revenue Sharing and for county assessments.”

    I believe this was accomplished under Gov. Baldacci; and was controversial since many towns were under taxing property, i.e. there are property rich towns with few children to school, so taxes were relatively low. One of the driving forces behind School Consolidation was the lust for thy neighbor’s property by towns with a low tax base but many children.

    Now there is one large property pool for consolidated school districts to tap into.

  9. “Mr Jones, you say reducing spending as a way to balance the budget is BS?”

    Actually I said exactly the opposite. True reduction is savings, but cost shifting is not true reduction. With cost shifting the State gets to pretend the reduction in the budget is a savings but the people still end up carrying the freight. And most of those municipalities who are forced to have only one source of revenue from which to pay for these added burdens: Property Taxes.

    The second lie in the “cost shifting is savings” fable, is that there is no related reduction in State taxes to go along with it. They can’t even claim a reduction in sales tax or income tax as the offset to the added burden I’ll feel picking up the cost shift locally.

    I pay the same amount of taxes to the State as I did last year and an added amount locally for the current year. This while the Gov looks me in the eye and says he’s reduced spending??? It doesn’t feel like a reduction to my wallet.

    Also, to be clear, I voted for the Governor and I likely will again since his opponent will be far worse than he is. I am however hugely disappointed in the man and his leadership. I’m not talking about the stupid trivial things the BDN and other papers complain about (his demeanor, the mural, the TV in the hall, etc), I’m talking about the type of issues discussed here and his comments regarding school issues.

  10. Donald Morin: “Democratic Ideas” …. Democrat and Democratic are not the same. The adjective form of Democrat is Democrat, same as Republican for Republican.

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