A CLEARER TAX PICTURE

It has been taken as gospel for years that Maine’s tax burden is among the highest in the country. Turns out this isn’t true. This, of course, won’t end the debate over whether Maine’s taxes are too high and what should be done about it. It shouldn’t, but the debate now must be recast to reflect Maine’s real ranking and, just as important, its downward trend.

The Tax Foundation, which for several years said Maine had the highest local and state tax burden in the country, this week released a report recalculating its rankings going back to 1977. The problem, it said, is that some states, particularly Maine, have a high percentage of out-of-state taxpayers. Massachusetts residents who own second homes in Maine pay property taxes in Maine, which was counted as a tax levy here, but their incomes were only counted in Massachusetts, not Maine, skewing the state’s tax burden – taxes levied, divided by income – to make it look higher than it was. The foundation is now trying to align tax payments with the states in which the taxpayers live.

The result is that Maine’s average state and local tax burden this year was 10 percent of income, ranking the state 15th. Under the new calculations, the highest Maine has ever been ranked by the Tax Foundation was fifth, in 1998, 1999, 2004 and 2005.

Two important points: At 10 percent, Maine’s tax burden is only slightly above the national average of 9.7 percent. Increase incomes a bit or slightly reduce taxes and Maine could quickly be in the middle of the pack.

Second, the trend in the state’s tax burden is clearly downward, as it should be. In 2005, it was 11 percent, 10.8 percent in 2006 and 10.3 percent last year. Further, Maine’s average state and local taxes, in actual dollars, have dropped from $2,787 in 2005 to $2,701 in 2008.

This new information should change the tenor of discussions in Augusta and statewide. Saying Maine had the country’s highest tax burden was an effective way to get people riled up to push for lower taxes. Given Maine’s real position, the discussion now is more sophisticated and should focus more on who pays, how much they pay and what those tax dollars are used for.

The new Tax Foundation numbers, for example, point to the fact that Maine’s Circuit Breaker program, which targets property tax relief to those with disproportionately high property taxes, is an effective solution without starving the state of needed revenue.

The revised rankings should also focus the debate on government spending, especially the duplication and inefficiency that comes with state, county and municipal governments.

Maine’s new, lower ranking should be a boost to the state’s psyche. But, it certainly does not mean the state should ease up on efficiency and consolidation efforts or stop looking for ways to further ease the tax burden.