November 25, 2024
Editorial

GUIDE FOR REFORM

Sometime this year after curing Maine’s health care crisis, the Legislature is scheduled to solve tax reform. (Can world peace be far behind?) Already, several comprehensive approaches to making state taxes fairer and more reliable have been suggested, with the governor’s plan still to be announced. There is no reason to settle on a single plan this early, but a thorough look at taxes by a group of state leaders produced an excellent set of principles to guide reform. Lawmakers would do well to use them in deciding which reform Maine should undertake.

The Speaker’s Advisory Committee on Tax Reform, assembled last year by former Speaker Michael Saxl, had 10 distinguished members with very different ideas about priorities in tax reform but a common sense that reform was needed. They devised a balanced, thoughtful reform plan that should figure into the legislative debate later this session. Nearly as important, however, were the committee’s five guiding principles for reform. They offered the following:

. Decrease volatility in revenues;

. Embrace fairness by enhancing progressivity when possible;

. Lower the tax burden with a deliberate long-term plan to align Maine’s broad-based taxes more closely to the national average and thereby make Maine a more attractive state in which to live, work and start a business;

. Achieve savings through regionalization and streamlining services where possible;

. Balance the mix of revenues between income, sales and property taxes.

These principles will seem overly simple to anyone who has looked at the problems with Maine’s tax system – the volatility of the last few years continues to be a painful lesson in what happens when reform is postponed. But it is not simple to anyone trying to find solutions that meet these objectives. Reducing volatility by, for instance, expanding the sales tax means increasing the regressive nature of that tax. Or balancing income, sales and property tax may mean increasing volatility. There are trade-offs with each principle; a successful Legislature will make informed choices about which trade-offs are worthwhile.

The committee could have added a sixth principle: Don’t wait. Tax reform is coming to Maine this year, perhaps legislatively but certainly in the form of a citizen’s initiative from the Maine Municipal Association. The group is trying to provide relief for heavy property taxes and understandably is no longer willing to wait year after year for solutions in Augusta that fizzle out each spring. Lawmakers need to act this year to decide on a course of reform for Maine, and that deadline should help produce some interesting results.

Maine has known for years that its tax system was archaic, depending too much on the value of real estate, reacting too strongly to slightly larger incomes and taxing too narrowly the range of goods. Reforming the system is complicated; a set of guiding principles makes the work more productive.


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