Forum: Economy in Maine complex Analyst says taxes not always top factor

AUGUSTA – The constant debate about economic development in Maine doesn’t have to be so taxing, according to economic officials who spoke Friday at a local forum.

Taxes, though certainly part of the equation, may not play as big a role in the state’s economic health as some have suggested, they said. Instead, the degree to which business is conducted in Maine depends on a complex set of factors that are not so easy to measure and evaluate.

The keynote speaker at the Maine Center for Economic Policy forum was Robert Tannenwald, assistant vice president and economist of the Federal Reserve Bank of Boston and director of the New England Policy Center. Tannenwald said claims that there is a clear correlation between tax burden and economic growth are exaggerated.

“It’s extremely hard to distinguish between cause and effect,” he said. “There is no credible evidence that tax cuts pay for themselves.”

In terms of the arguments made, Tannenwald said special-interest groups frequently come up with studies that skew the facts in an effort to get government to adopt policies they favor. Contrary to what many studies have suggested, he said, tax predictability frequently is more important to growth than overall tax burden.

“There are many mathematical studies that are quite sloppy and biased,” Tannenwald said. “Maybe we should go slow with this conclusion that taxes have a significant effect.”

The economist said that some business leaders have told him privately that business location decisions often are made based not on which tax schemes are best for a company or its employees, but on which schemes are most generous to its top executives.

“I’ve had business people say that to me,” Tannenwald said. “I’d like to hear them say it in public testimony before a legislature.”

Other speakers said factors such as education, environmental protection and access, and health care also play significant roles in economic growth. Colleen Quint, executive director of the George Mitchell Institute, was frank in assessing the economic importance of getting more Maine high school graduates to attend college.

“Investing in education is economic development,” she said.

Kevin Gildart, vice president of Bath Iron Works, said the economic environment of any state is connected with the health and safety of its citizens. He said that when it comes to providing health care, there needs to be the “right amount” of competition and more emphasis on increasing efficiency, reducing medical errors and improving outcomes in order to have an effective overall system.

“Thirty percent of the cost of health care involves medical errors,” Gildart said.

Christopher St. John, Maine Center for Economic Policy’s executive director, wrapped up the forum with a “take home” message for those who attended. He said that to boil Maine’s economic well-being down to the single issue of taxes “misses a whole lot” of other economic issues that may be more important.

The prospects of Maine adopting a taxpayers’ bill of rights similar to what Colorado voters approved 10 years ago but suspended last fall poses some “very serious threats” to the type of investments government should make to help foster economic development, St. John said.

“There is a lot going on that is right,” he said. “[Otherwise] how do you possibly explain what’s been going on in Portland the past 30 years?”