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Governor Paul LePage visited Machias the evening of April 29 to hold a "town meeting" to discuss his budget plan. While short on details, the summary presented in a 21‑page handout had rosy examples of how his "tax reform and relief plan" would pan out for different taxpayer scenarios. In one example, a single 65‑year‑old with an adjusted gross income of $20,500 would pay $283 less than current law due to changes in income, sales and property taxes. In another example, a four‑person family taking standard deductions and with an adjusted gross income of $86,000 would pay $396 less.
About 100 people gathered at the Rose M. Gaffney Elementary School gym to hear what the governor had to say. Sitting on the stage, he addressed the audience; no interaction with the public was allowed other than with a form for written questions.
The governor is holding his town meetings around the state "for the purpose of trying to educate everyone of what we're trying to do in Augusta," he told the audience. That effort, he explained, is based on his belief that an "efficient and effective government is the one closest to the people." According to LePage, "Too much money hides a lot of deficiencies." He blamed urban areas with wasting money and pointed to their high real estate tax rates of 25 to 30 mills, while characterizing rural areas with making do on mill rates of six or seven.
However, Maine Revenue Service numbers show that the state average in 2012 for municipal property tax rates was 14 mills, with less than a handful in each county falling under 10. Since 2012, many municipalities have been raising mill rates to meet their budgets in the face of the falling percentage of revenue sharing from the state. They match or come close to their larger cousins. For example, the Calais mill rate is at 25.3, Eastport is at 23, Lubec is at 20.76, Robbinston at 20.5, Machias at 20 and Perry at 15.4. In comparison, Lewiston is at 26.59 and Bangor at 21.8.
Constitutional amendment proposed
LePage envisions a three‑year timetable to create changes in how Mainers are taxed and how taxes are used by the state and by municipalities. He has introduced a bill for a constitutional amendment to permanently eliminate the income tax by 2020. To reach the point of total elimination, his plan would reduce the top income rate for individuals from 7.95% to 6.95% in the first year. By the third year, 2019, the top rate would be 5.75%. Income tax currently brings in about $1.4 billion, which is one‑third of state revenues. Additional revenues are brought in by property taxes at about 45% and sales taxes at about 22%.
In the face of lower and ultimately no income taxes, LePage has various proposals to help offset what might be a municipal need to raise property taxes for revenue purposes. He proposes different exemptions and credits such as an increase in the homestead exemption for seniors, but with the exemption eliminated for those under 65. For those under 65, the maximum property fairness credit would go from $600 to $1,000, and for those over 65 from $900 to $1,500. The funding appropriation to pay for the increase would rise from $30 million to $90 million. Pension incomes of up to $35,000 would be exempt from state income tax, and income tax on military pension benefits would be eliminated in 2016. The estate tax would be eliminated. The budget would reduce the top corporate tax rate from 8.93% to 6.75%.
Elimination of revenue sharing
In addition the governor's budget plan would eliminate the state's revenue sharing program, where a percentage of local income, sales and corporate taxes are returned to municipalities to supplement their budgets. In a handout given at the town meeting, over half the booklet was devoted to columns showing municipal names, associated net income tax for 2013, and the proposed tax cut savings to individuals as opposed to the amount received by the municipalities in 2014 through revenue sharing. LePage used as his example the town of Machias, where the income taxes paid totalled $1.2 million and $182,452 was provided to the town in 2014 revenue sharing. LePage's plan would have Machias individuals retain $378,000 out of the $1.2 million that would have been collected in income taxes, instead of funds being returned to the municipality as revenue sharing. His plan does not explain how municipalities should fund their operations.
The loss in income tax revenue to state coffers would be made up in part by an increased and broadened sales tax, LePage said. "Between Memorial Day and Labor Day, 26 million people visit." He added, "That's where you make a big piece of it." According to the Maine Office of Tourism 2014 Annual Report, in 2013 total net spending by day‑trippers, overnight tourists and business travelers over the course of the year was a bit over $5 billion, with retail, lodging and restaurants each garnering about $1.4 billion, gasoline and recreation receiving a total of $1 billion and transportation $44 million. The tourism report shows that southern Maine benefits from the largest share of tourism visits.
Perhaps because the town meeting had a one‑hour timetable, the governor did not elaborate on the details of how the sales tax would be changed to make up for lost income tax revenue. The state's 2014 budget has almost $1.5 billion income tax revenue for the $7.7 billion in expenditures. MaineWire reports that the service provider tax would be increased 1 percentage point to 6%, and the sales and use tax would be raised to 6.5%. However, the sales tax on meals would decline from 8% to 6.5%, and taxes on auto rentals would drop from 10% to 8%. The lodging tax would remain at 8%.
An additional strategy brought forward in the governor's plan, that nonprofits with property valued over $500,000 could be taxed by local municipalities as an additional source of revenue, has been killed by the Taxation Committee. Very few nonprofits of that size exist in many of the rural counties, including Washington County.
Energy costs and nuclear power
Among other points the governor raised at the town meeting was the importance of cheap energy for attracting business to the state. Citing the 13 cents per kilowatt hour cost in Maine versus the four cents found in Alabama, he said that in order to reduce the cost of energy in the state, nuclear power needs to be a part of the mix. He added that the state could buy cheaper nuclear power from Point Lepreau in New Brunswick and Seabrook Station in New Hampshire. "We don't buy because the legislature says no." He added, "Really, it's illegal." The governor may have been referring to a law passed by voters in 1987, with amendment in 1999, which restricts the construction of new nuclear power plants by ensuring that: voters must approve through statewide election the construction of such a plant; and that construction cannot proceed until the Maine Public Utilities Commission (PUC) has certified three areas of concern. Two of the three‑member PUC are LePage appointees, with a third LePage nominee announced on May 4.
The governor has a bill before the legislature, LD 1313, An Act To Amend the Laws Regarding Nuclear Power Generating Facilities, that would delete two portions of the 1987 bill, allowing for the construction of what are considered small and/or modular nuclear reactors of 500 megawatts or less. At the public hearing held on April 29, Patrick Woodcock, director of the Governor's Energy Office, stated that a federal executive order to reduce greenhouse gases by 40% over the next 10 years mentions small modular nuclear reactors that "offer advantages including siting flexibility, greater efficiency, potential nonproliferation benefit, an attractive international marketplace and lower capital investment." The committee was expected to take up the bill at a May 6 workshop. |
