Maine legislator: Tax cuts added to budget pressures

AUGUSTA – Complications facing state budget negotiators this year result, at least in part, from the aggregate amount of tax cuts enacted in recent years, a ranking legislator said Wednesday.

Since 1995, potential tax revenue has declined by more than $450 million annually.

Planning for the upcoming two-year budget cycle, Gov. Angus King faced a potential gap between anticipated revenue and projected expenditures of about $250 million, according to administration estimates.

King’s $5 billion tax-and-spending proposal would bridge the gap. Some lawmakers, however, have already voiced displeasure with elements of the King package.

“I disagree with all the tax cuts that have gone on,” said Senate President Michael Michaud, D-East Millinocket. “It was a mistake to cut that many taxes in a relatively short period of time.”

In recent years, King and the Legislature have lowered the sales tax from 6 percent to 5 percent, repealed a snack tax and provided property-tax breaks for homeowners.

They have also eliminated taxes on hospitals and nursing homes, boosted the personal income-tax exemption, provided property-tax breaks for businesses that invest in equipment and machinery and exempted from income taxes the first $6,000 in pension benefits.

Other legislators say the state can cope with current revenue trends and still cut more taxes.

“The whole point of surpluses is that you’re taking in too much money,” said Senate Republican Leader Mary Small, R-Bath. “I don’t think you’ve made a bad investment any time you give people their own money back.”

Some emphasize spending increases, not tax cuts, as a source of budget pressures. From 1996 through 2000, General Fund spending jumped from less than $1.7 billion a year to more than $2.3 billion, according to the Legislature’s fiscal office.

“The shortfall is caused by growth in government,” said Assistant House Minority Leader William Schneider, R-Durham.