No more waiting, tax reform is here

If you ever complained about taxes or pointed a finger at legislators in Augusta and said, “they ought to do something,” then pay attention now. “They,” being the Taxation Committee, did do something. They reported out to the entire Legislature a remarkable tax reform and relief package. With strong bipartisan support, Republicans and Democrats have put aside party interests to do what is best for Mainers.

The debate on tax reform has been one of those perennial issues. Remember the failed Palesky initiative? Then soon afterwards TABOR plunged Maine into another tax debate. Mainers rightly understood that those radical proposals would do more harm than good, and rejected both. But they did it with the full expectation that the Legislature would provide them with comprehensive tax reform that would make a difference to their pocketbooks, without making drastic cuts to the services they count on.

So throughout the last election, Maine voters told candidates to get tax reform on the agenda and get it passed.

AARP has been following the tax reform debate within the Taxation Committee. We have watched as our legislators discussed a wide range of issues. We shared our perspective and urged the Taxation Committee to adopt a meaningful yet balanced approach.

The Tax Committee’s Reform Package brings the relief we are looking for. About 96 percent of all Maine households will pay less income tax. Income tax will fall to a flat rate of 6 percent. That means more dollars in the pockets of most of us ordinary people. The average income tax relief amounts to $377 per family.

This is good news for small businesses. Many small businesses in Maine file as S-Corporations or LLCs. They pay tax on their business through the income tax. Lowering the income tax rate directly benefits them and allows them to reinvest money in their ventures.

We have the chance to get off the top of the list for being the highest taxed state in the country. But this will only happen if we get behind this tax reform proposal. Maine families and small businesses will benefit like never before.

The committee’s reform package exports taxes to vacationers and others who are not full-time residents. These people enjoy many Maine services and are happy to pay for the privilege, recognizing that Maine is a bargain for families from away.

This legislation will broaden the sales tax base in keeping with other New England states. It will include a number of services just like other states already do. Some complain that this looks like a tax increase, but that criticism misses the point. The state is raising more money through the sales tax. While consumers of services in Maine are residents and visitors, the money raised flows almost entirely back to Maine residents in the form of lower income and property taxes, making this revenue neutral package is a win-win for all Mainers. We think most people will agree that this is a long overdue correction to the way Maine has levied the sales tax.

This tax reform package provides real property tax relief. Mainers have seen property evaluations and taxes rise – in some cases at an alarming rate, causing real fear of being squeezed out of hearth and home. This legislation increases the Homestead Exemption to $26,000. All Maine resident households will share in this tax relief.

In addition, targeted relief is expanded through the Property Tax and Rent Rebate program. Changes in how the rebate is calculated results in a maximum refund that is increased to $2,500. More than 412,000 taxed families will see on average $200 of tax relief or more than $81 million dollars statewide of real property tax relief.

For older Mainers, this legislation protects those over 65 from being evicted from their homes. That worry can now be put to rest if this proposal is passed.

This tax reform package also protects the funding base for important health programs and local services. Our AARP members repeatedly tell us that they want to be certain that funding is available for programs like MaineCare, prescription drugs and homecare services. They want adequate coverage by first responders – fire, police and EMTs. They know that you cannot have something for nothing so they support a fair and balanced tax system. This legislation, by being revenue neutral, strikes a balanced approach.

AARP urges our members and all citizens to get the facts. Look at the whole package of tax reform and avoid the temptation to pick apart any one item. Taken together, the parts of this comprehensive tax reform deliver what Mainers have needed for a long time – a fair, balanced and comprehensive approach to tax relief and reform.

The bipartisan committee did their part by coming out with a tax reform bill that we can all benefit from. You can do your part by telling your legislators that you have waited long enough, and the time is now for tax reform. Hopefully, our legislators will get the message and do their part – pass this proposal, and provide us with the tax reform and relief we have all been waiting for.

Jud Dolphin is AARP Maine’s state director.