The Tax Chance

A news story the other day pointed out that yet another no-tax governor had experienced the epiphany that ruining public services in order to save a buck was shortsighted or, worse, destructive. The news should be interpreted here not as a free pass to raise taxes but to seize the opportunity to get Maine out of the ranking of one of the most tax-heavy states in the country.

Maine, as of last count, was second in tax burden, which the measure of state and local taxes as a percentage of income. Maine incomes have been rising, slowly, toward the national average. Now, despite the pressure, is not a time for broad-based permanent tax increases if the state hopes to shed its reputation as an expensive place to do business. Only a rookie politician would pledge no new taxes under any circumstances; Maine’s political leaders should instead insist that all reasonable opportunities for saving be explored before supporting new taxes. Lawmakers have yet to achieve that.

The news story in The Washington Post this week follows many others that report on Republican governors who begin certain they can chase out waste fraud and abuse to balance their budgets and then meet reality. The result has been tax increases proposed or at least not opposed by Republican governors in Nevada, Idaho, Indiana, Georgia, Arkansas and Ohio. The Post adds to that list Gov. Bill Owens of Colorado, a political evangelist of the “Taxpayer Bill of Rights,” which restricts spending constitutionally and has left Colorado, according to the governor, some $3 billion short of needed expenditures. He is now trying to persuade residents to lift the restrictions.

It isn’t just Republican governors, of course, who raise taxes – it’s just that they’re newsworthy. Democrats face similar problems and likely will react similarly. For instance, all governors face an unavoidable challenge: the federal government, having made tax cuts a priority, has less money available for state grants. Excluding Medicaid, grants proposed for 2006 are $31 billion lower than in 2001 as a percentage of the economy. Federal mandates aren’t going away, but the funds to pay for them are slipping.

With these problems pressing on all states, it was instructive to watch the two parties as the state budget was being passed. Democrats bashed a budget offered by a conservative group that is not part of government while Republicans were trashed Dirigo, the state’s only comprehensive attempt at making sense of health care.

Tax increases can be passed quickly; figuring out how to avoid them takes time. Maine may not have much spare tax money but it has time, and it should have the creativity in Augusta to see that if some states are raising taxes, the states that restructure to avoid them will gain an advantage economically. This requires the two parties to work together to help Maine, which doesn’t seem like asking too much.