Three of 4 in Maine delegation vote against tax-cut measure

AUGUSTA – Legislation that would extend some current tax breaks, at a cost of $70 billion over the next five years, sharply split Maine’s congressional delegation with the two Democratic House members and Republican Sen. Olympia Snowe opposing the measure and Republican Sen. Susan Collins supporting it.

“More than 100 million American taxpayers benefit from the various tax reductions that we have passed since 2001,” Collins said. “In Maine, 100,000 taxpayers have benefited from the lower capital gains and dividends tax rate, and about 25,500 Maine taxpayers have benefited from [alternative minimum tax] relief.”

Collins said nearly half the cost of the bill was to deal with the change in the alternative minimum tax that has not been indexed for inflation since it was passed. The AMT was designed originally to make sure that the rich pay at least some tax, but without the proposed change in the bill, more upper-middle-income families in Maine would be subject to the tax this year.

But Snowe said she could not support the measure because it goes far beyond the AMT provision and extends tax cuts that are not scheduled to expire this year.

“It is a cynical approach designed to accomplish the goal of passing the capital gains and dividend proposal,” she said. “At a time when average-income Americans are really feeling the burden of high energy prices [and are unable] to purchase affordable health insurance, this is not the time to be widening the income gap in America.”

Snowe had successfully blocked a similar extension measure last December. At the time she said Congress should not be extending tax cuts that benefit the wealthy while advancing a broad budget-cutting bill that mainly targets programs for the poor.

Collins said the continuation of the lower capital gains and dividends tax rate is important because it has stimulated the economy and created jobs.

“Since that tax relief became law, our economy has grown at nearly 4 percent per year, and over 5 million new jobs have been created,” she said.

Collins said federal revenues from the capital gains and dividends tax have increased, not decreased, as a result of the rate reduction to 15 percent from 20 percent. She said revenues were projected to go down by $3 billion between 2003 and 2005, but instead went up $80 billion in 2005.

Snowe said this measure increases the federal budget deficit and exhausts revenue that could have been better used to continue various tax breaks that have proved their worth. For example, she said, tuition tax credits and a research and development tax credit for alternative energy development are not in the package.

Rep. Tom Allen called the tax-cut package irresponsible for increasing the national debt and said it will lead to the cost of interest payments alone on the debt to average $300 million a year over the next decade.

“The Republicans are drunk on tax cuts for the rich,” he said. “This is fiscally insane.”

Allen said House Democrats have voted time and time again for tax cuts, but tax cuts for the middle class. He said middle-income tax cuts would have a greater impact on stimulating economic growth than the capital gains and dividend package.

Allen said the decision to pass the unneeded tax cuts will mean future generations will have less money to spend on needed services and infrastructure needs.

“I opposed the congressional leadership’s tax bill because it does not benefit most Mainers, and certainly not working families in Maine,” said Rep. Michael Michaud. “It mostly benefits the wealthiest people in America, most of who are not in our state.”

He said people making over $1 million a year get almost half of the tax breaks, for an average of $41,400 in tax cuts per millionaire. He said that is about $10,000 more than the average yearly wage for Mainers.

There was also criticism of some special tax breaks added to the bill in the conference committee. For example, music companies will be able to write off their musical advances over five years, a $13 million break spread over the next decade. And some ships that haul cargo on the Great Lakes would get a $20 million tax break through 2015.