TAXES START TO DIP

The Washington-based Tax Foundation had a little trouble getting Maine’s property taxes right – for a brief time this week it listed them among the lowest in the nation before issuing a correction – but it got a more important point right: The trend of the overall burden is downward. Lawmakers should pay attention to that trend.

Maine ranks sixth overall for federal, state and local taxes as a percentage of income; it ranks second for the measure it watches most closely, the state and local burden, according to the foundation. These are not numbers to cheer about – not yet anyway. But Maine’s tax burden is dropping. The 12.3 percent state-and-local burden for 2004 is the lowest since 1994, even as the national average has remained steady at around 10 percent for the last 30 years.

Something else the foundation’s numbers highlight: Maine’s total tax burden, including federal taxes, is 28.9 percent of income; the national average – that place in which Maine would dearly love to reside when it comes to taxes – is 27.8 percent and was 29.9 percent just two years ago. A small shift, holding the line on taxes as incomes rose or creating a two- or three-year tax-reduction plan that made room for thoughtful reform could drop Maine into the middle.

Reducing just the state and local burden to the national average is much more difficult, but one of the helpful aspects of the Tax Foundation’s work is to see what other states have decided is the proper tax level. On state and local burden, there are a few outliers at the high end, such as Maine and New York, a few at the low end, New Hampshire and Alaska, and half the states bunched toward the middle. Twenty-five states have burdens between 9.5 and 10.5 percent.

What are the chances of Maine’s burden falling that low? For only four years of the last 35 – 1977-1980, roughly the effect of budgets by Gov. James Longley – would it have fallen into the average. The question for lawmakers is whether they want Maine to return to that level and, if so, what are they willing to sacrifice to get there. Politicians talk endlessly of the need for lower taxes; Maine previous experiences suggest that getting its state-and-local burden simply out of the extreme end would be an achievement.

But the overall message that Maine can lower its tax burden and, for several years, has been successful in doing so should not be lost in the comparisons with other states. It is a bit of good news amid a dismal budgeting season.