Tax Reform On The Democratic Agenda

You hear “tax reform”, you typically think “Republican”.  You can’t be blamed for that, of course, it has been one of the core GOP messaging models for decades, both nationally and in the state of Maine.  But this year Democratic leaders in the legislature are making a push for tax reform this session.

But, before you get too confused or excited, Republicans are decrying the plan as “not doing enough” and merely “shifting the tax responsibility from place to place”.  Central to their complaints is the plan to reduce to top income tax rate while broadening the sales tax – a move they feel is little more than “moving pieces around”.

Still, while Senate Minority Leader Kevin Raye and other Republicans are skeptical, the proposal (which is all academic at this point, there is no formal bill for review yet) certainly has some features that would speak to the Republican heart.

To start, Maine’s top income tax rate is a whopping 8.5%, which happens to be tied for the sixth highest in the nation.  This is made worse by the fact that it kicks in for any Mainer who makes more than $20,150 – including small businesses.  Worse still, Maine’s neighbors are in a much more tax friendly position – just look at New Hampshire and its complete lack of income tax – which means if you want to live and conduct small business in the northeast, Maine isn’t exactly an attractive place.  It has long been the Maine GOP mantra that the state is overtaxed and punishing entrepreneurship, so attempting to do something about this is certainly something of interest to Republicans.

Of course, if any meaningful tax reform comes out of Augusta in the next two years, it may effectively stymie one of the GOPs principle advantages in the 2010 gubernatorial contest (and hell, the legislative elections too) – namely a sluggish economy and a population who blames punative taxes for some of that pain.

So, perhaps resistance to this kind of tax reform is a little deeper than simply worrying that the cards in the deck are just being reshuffled.