No new taxes? Debate over hikes a mix of politics, semantics

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Here are a few riddles.

If the government decides to lower your taxes, but not for two years, did the government raise your taxes this year?

What if you don’t pay your taxes, and the Legislature passes a law forcing you to settle up before you can get a state contract? Is that a tax increase?

How about if a governor says he opposes a new tax, but voters approve it? Can his political opponents pin the increase on him?

If you answered yes to all of the questions above, you’re absolutely right – and wrong.

The debate over how much the Baldacci administration has raised taxes (and fees) during its tenure in Augusta has intensified as the coming gubernatorial election begins to grab headlines and GOP hopefuls sense a chance to unseat the Bangor Democrat.

Republican Reps. David Trahan of Waldoboro and Jon McKane of nearby Newcastle are leading the charge, contending in their “Fleecing of Maine” series on the House GOP Web site that the administration has cumulatively raised taxes by $900 million – far more than the $239 million figure used by Baldacci’s budget office.

“I’ve done my homework,” Trahan, a four-term lawmaker, said Thursday as he hoisted a thick binder full of legislation authorizing the new taxes. And spreadsheets? Trahan has those too, direct from the nonpartisan legislative Office of Fiscal and Program Review.

Administration officials say Trahan’s homework needs work.

“It’s flawed on so many different levels,” said Baldacci’s budget officer, Ryan Low, who noted that the administration did not raise any broad-based taxes – such as sales or income tax – despite being faced with a $1.2 billion deficit when taking office in 2003.

But how does one explain the $661 million difference? That’s another riddle, the answer to which is both simple and complex. But there is an answer.

There is also some common ground between the Baldacci budgeters and the House Republicans, including the acknowledgment of a $122 million increase in revenue from the new cigarette tax and millions more from increases in outdoor sporting fees.

But agreements are few in this debate, and there are many more points of contention – both large and small.

For one, Trahan – and the fiscal office for that matter – count as a tax increase the administration’s decision to delay two tax credits – one for Maine college students and another for broadcasting equipment – totaling about $23 million.

Had the exemptions not been delayed, they argue, some Mainers would have seen lower tax bills this year.

Low contends the exemptions, passed two Legislatures ago, were never funded and never took effect. Therefore no one has seen their taxes rise as a result, he said.

Another $26 million in Trahan’s list of increased taxes comes from the renewal of an oil transfer fee first adopted in 1985 and set to sunset last year. The Legislature extended the fee before it expired, so Low argues that since the fee never went away, no one saw a tax increase or decrease as a result.

Anyone with a checkbook knows small items add up, and there are some smaller items on the list. One is the $2 million in revenue expected from requiring contractors to settle outstanding tax bills before working for the state.

Administration officials say those are taxes that were due the state and collecting them simply should not count as an increase in tax revenue.

Although the smaller items demonstrate the level of detail in the debate, the larger items help close the $661 million gap much more quickly.

One involves about $124 million in increased gasoline taxes that were set during Gov. Angus King’s administration. The tax is indexed to rise with inflation, but McKane points out that Baldacci could have ended the indexing through legislation.

Low notes the administration did submit such a bill last year, but it was defeated in the Legislature.

Trahan’s numbers also include the new tax on slot machines that expects to bring in about $65 million through fiscal year 2007. Low said the governor vigorously opposed the slots legislation, which was approved by voters in 2003. So why, Low asks, should the tax increase be pinned on the administration?

Trahan has an answer. He notes that Baldacci signed a revised version of the bill that gave a bigger chunk of the slots revenue to the state.

There are other aspects of the debate, such as whether the Dirigo savings offset payment – intended to recoup an estimated $43.7 million in health care savings last year – should be considered a tax on insurance companies. Also a point of contention is whether Trahan is correct in including $298 million in tax revenue that is later reimbursed to hospitals as part of his $900 million figure.

The debate is likely to continue, and many questions remain, one of which is: Will voters care?

Julie Ann O’Brien, the newly appointed executive director of the Maine Republican Party, thinks so.

“It’s just more money out of people’s pocketbooks to pay for increases in the state budget … and people are sick of it,” she said.

“The Republicans are all about doom and gloom,” countered Jesse Connolly, who is managing Baldacci’s re-election campaign. “We’re staying on the high ground and telling what the real numbers are.”

But Amy Fried, a political scientist at the University of Maine, said Republicans and Democrats alike have to be careful about the numbers they use and whether they can back them up. Even then, she said, if the differences turn out to be semantic, voters might just tune out.

“Before you know it, if all these different numbers are out there, they probably don’t end up being persuasive one way or the other,” she said. “People who like a candidate will still like that candidate and a lot of the other people will just get confused.”