Maine has a long-standing reputation of having one of the best “qualities of life” in the country. A key ingredient of these assertions is the “cost of living.” After all, having a great quality of life is less meaningful if the costs are beyond the means of average Mainers.

Unfortunately, for way too long, there has been a lack of objective, quantifiable data on the cost of living in Maine. But, the drought is over. With data collection performed by the Maine Heritage Policy Center, Maine is now represented in the venerable ACCRA cost of living index. This index is the country’s longest running, published every quarter since 1968, and most respected cost of living index that is used widely by both the private and public sector.

The index uses prices from six major categories: groceries, such as eggs and potatoes; housing, such as mortgage and rent payments; utilities, such as electricity and heating oil; transportation, such as gasoline and tire balancing; health care, such as dental visits and prescription drugs and miscellaneous, such as fast food, clothing and entertainment.

Specifically, the survey was conducted twice in 2006 for the Portland and Bangor metropolitan statistical areas, or MSAs, as defined by the U.S. Census Bureau. The latest results are for the fourth quarter of 2006 of which a total of 194 MSAs participated.

Portland had the 23rd highest cost of living in the survey and was 16.4 percent above the national average. Anyone who has recently tried to buy a house in Portland will not be surprised to learn that housing is the primary culprit behind Portland’s high cost of living. In fact, Portland had the 24th highest housing costs at 33.9 percent above the national average. Utilities also contributed with Portland ranked fifth highest at 34 percent above the national average.

Bangor is much more affordable than Portland; however, cost of living is still above the national average. Bangor had the 43rd highest cost of living in the survey and was 3.4 percent above the national average. The primary culprit is utility costs where Bangor ranks right behind Portland with the seventh highest cost at 29.3 percent above the national average.

Portland’s and Bangor’s cost of living being above the national average begs the question: “Why is Maine an expensive place to live?” Naturally, there are obvious answers such as climate and geography. However, less obvious are the choices made by our policy-makers, such as taxation.

Intuitively, it is easy to see how taxation affects cost of living because taxes are a big part of our every day purchases. For example, we pay gasoline taxes every time we fill up our car. If you look closely at the pump, you will see a sticker that details the federal, state and sometimes local gasoline taxes that you are paying. However, it does not show on your sales receipt because it is already included in the price.

The gasoline tax is especially important to Maine’s costs of living because, according to the Tax Foundation, Maine has the 11th highest gasoline tax in the country. Higher gasoline taxes mean higher gasoline prices leading to a higher cost of living.

Overall, Maine has one of the highest tax burdens in the country. One way or another, much of this burden filters its way into higher prices for the goods and services we buy every day. To test this idea, I compared cost of living data at both the MSA and state level with their respective tax burden. The comparison found a significant positive relationship between taxes and the cost of living. Put simply, as the tax burden increases, so does the cost of living.

Mainers often hear the tired phrase that “taxes do not matter to business relocation.” Well, no one can dispute that the cost of living does matter to business relocation. In fact, the primary users of the ACCRA data are business relocation specialists. Since taxes do help to drive up Maine’s cost of living, our high tax burden is eroding our ability to compete.

By cutting taxes, Maine policy-makers would provide needed relief to Maine’s beleaguered taxpayers; and they would be telling business leaders across the country that Maine is “open for business.”

J. Scott Moody is vice president of policy and chief economist at The Maine Heritage Policy Center. His email address is jsmoody@mainepolicy.org.