REAL TAX REFORM

By lowering the Maine income tax rate from 8.5 to 6 percent and expanding the reach of the state sales tax, the Legislature’s Taxation Committee would reduce the burden on Maine taxpayers by about $140 million a year, saving middle-income taxpayers about $200 each. But that is only the most obvious result of a long-awaited tax reform plan from Augusta, a reform that represents a profound change in the way Maine pays for state and local services.

The drop in the income tax rate would lower Maine’s income-tax ranking from seventh in the nation to 34. The committee further proposed reducing property taxes by expanding the Homestead exemption and the Circuit Breaker Program. It would “export” more of Maine taxes to out-of-state residents by depending more on taxes they are more likely to pay – meals and lodging, real estate transfer and sales.

The last issue is what makes the reform vulnerable. No one wants an expanded sales tax, and from the recent budget protests that surrounded long-sought savings in education and health care, very few people want to see services reduced. The result of these has been that any tax reform that lowers one tax and increases another – even if that change makes the system fairer and simpler and even if it means that Maine residents will actually pay less of the total – has been doomed by lobbyists.

Lobbyists have narrow interests, and while there’s nothing wrong with them raising specific doubts about the Legislature’s proposals – we are doubtful of a couple ourselves – the cumulative effect of their actions has been to kill one reform after another while average Maine families wait in vain for the tax break they keep hearing will be coming their way.

The Tax Fairness Plan, a bipartisan reform that left the Taxation Committee with a vote of 11-3 in its favor, not only lowers the income tax in Maine, it adds tax credits to reduce the rates for most people even further and simplifies tax filings. That not only makes it easier to fill out forms – saving time and money – but it makes the system more easily understandable so it is more likely that all taxpayers will pay their fair share.

Coupled with this plan is a constitutional change that would require a two-thirds vote of the Legislature before any future sales tax increases or decreases and would give municipalities the option of a sales tax if the revenue was used to further lower property taxes. These proposals preceded the Tax Fairness Plan and may be less important in the presence of a 25 percent drop in the income-tax rate, but it is a measure of how seriously the committee took Mainers’ concerns about taxes that it moved this separate legislation as well.

The tax proposal before the Legislature this week goes beyond reform and provides meaningful relief. More than that, it improves Maine’s burdensome tax system and makes future reforms more likely. These are reasons enough for lawmakers to support this important and long overdue change.