Maine Public Broadcasting quotes Scott Drenkard on Maine's tax climate

October 11, 2012

Maine was the most improved state in the nation on the annual state business tax climate index. So says The Tax Foundation, which reports that Maine jumped from 37th to 30th place. The index compares all of the states on corporate taxes, individual income taxes, sales taxes, unemployment insurance taxes and property taxes, both residential and commercial. Gov. Paul LePage says he is pleased at the improvement, but says for Maine to compete in the global market place, it will have to do even better.

Gov. LePage says The Tax Foundation study is good news that he will use to encourage companies to locate or expand in Maine. But, he says it's only a start. He notes the state will probably see an improvement in its ranking next year as income tax reductions take effect Jan. 1, but stresses he wants further reductions in the tax burden.

"It's so far away from where we need to be that it's symbolic in many ways that we are moving in that direction," he says. "But it is really - in order to be prosperous, if you look at who is prospering, which states are prospering, you have to look at their tax structure, and they're completely different from ours.

LePage says he wants the overall tax burden of the state reduced. The most prosperous states, he says, have tax mixes that look very different from Maine's. Scott Drenkard of The Tax Foundation says Maine has a comparatively high tax burden.

"We calculated that the tax burden paid by residents in Maine was 10.1 percent of personal income - that ranks No. 9 in the country," Drenkard says. "So Maine is generally a high-tax state, and the structure can always be improved, but the burden itself tends to be a function of what the polity has a desire for in terms of government services."

The highest ranking states on the index don't have all of the major taxes. Gov. LePage says Maine is now competing in a global marketplace, and to attract the large multinational companies to do business in Maine, he'd like to abolish the corporate income tax.

"I think the state of Maine should have no corporate tax at all and the United States of America should be around 20 percent," he says. "And then we could compete worldwide."

LePage says he will be proposing additional reductions in other taxes, including the individual income tax. He says he is looking at several ideas being developed at his request by Maine Revenue Services, but he's not ready to discuss which ones he might propose.

Rep. Gary Knight, a Republican from Livermore Falls, is the co-chairman of the Taxation Committee. He agrees with the governor that further tax reductions will help the state's economy grow.

"I like that outside-the-box thinking - I really do," Knight says. "I have great respect for his vision in that area. I mean, he gets it. He understands it, I think, like no governor we've had in many, many years. If we just do the same old, same old, Maine will continue to be at the bottom of the economic ladder."

Knight says he has been looking at possible tax reductions, but says it will take a bipartisan approach to achieve a package that will get broad support. He says the tax reductions that were passed as part of the budget during this session have not yet fully taken effect and will help stimulate growth.

But the lead Democrat on the Taxation Committee, Rep. Seth Berry of Bowdoinham, says the tax policies give too much of the reductions to the wealthy at the expense of the middle class.

"The fact is, the customers and the workers, the middle class, are taking it on the chin," he says. "Until we are putting money back in their pockets the businesses won't be making sales and our economy will continue to tank. We're last in the nation right now with respect to personal income growth since this governor took over."

Knight and Berry say the big challenge will be to find the money to pay for the cuts, as the state now faces an estimated structural budget gap of $756 million.

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