Green and Red make tax reform?

July 30, 2009

Earlier this summer, Maine’s Democratic-controlled legislature passed a nearly flat income tax of 6.5 percent with a small surtax kicking in on incomes greater than $250,000. Previously, the top income tax bracket was 8.5 percent. The loss of revenue from the tax cut is covered by an expansion of the sales tax to include additional services.

Groups opposed to the change are collecting signatures for a referendum and to use the “people’s veto” to stop this legislation. Maine has successfully used the ballot box to roll back taxes as with last year’s repeal of the soda tax

The Green Party has said they hope to launch a new campaign called “No Flat Tax of ME”. Their complaint is that new plan raises taxes on the lower incomes. It should be noted that this does not take into consideration credits added to the income tax.

The Maine Heritage Policy Center has critiqued the policy from opposite end of the spectrum saying that reform does not do enough to flatten the tax code. MHPC shows that when one looks at the effective marginal tax rate taking into consideration the credits and deductions the tax on income is far from flat.

If the “people’s veto” passes this November, these groups will have to set aside difference in order to push tax reform.

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