Portland Press Herald / Maine Sunday Telegram
MAINE VOICES Tax reform helps Mainers of all income levels
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The new tax system is also more progressive than the current system.
THOMAS WATSON July 28, 2009

ABOUT THE AUTHOR

Rep. Thomas Watson, D-Bath, is the House chair of the Taxation Committee.

BATH — Opponents of the recently enacted Tax Reform bill (LD 1495) are doing everything they can to confuse the public.

A recent salvo was a column in this newspaper by South Portland resident Albert DiMillo, in which he claims that the bill "significantly reduces the progressiveness of the income tax law." This is simply untrue.

By any accepted measure, the new tax system will be more progressive, meaning that lower- and middle-income persons will pay a smaller proportion of the overall tax burden than they do now. Even after any new sales taxes are included, the overall tax system is still more progressive than now.

And LD 1495 reduces the overall tax burden on Mainers by more $57 million, and every income group wins.

Those of us who have labored on this issue for years believe that LD 1495 is just about as fair a system as is possible.

The overall tax burden of the bottom half of taxpayers will fall by almost 19 percent, and will decrease by 3 percent for the top 10 percent of taxpayers.

High-income people do receive, on average, the greatest dollar benefits; but only because their overall tax contribution to the state is much higher. Proportionally, folks on the lower end get a bigger break.

Mr. DiMillo's assertion that "3.2 percent of the taxpayers will receive a net tax savings of $37.5 million" is just wrong.

The truth is that the top 10 percent of taxpayers will see a net tax savings of $17.7 million.

This is a large number, but a fair one, well below the percentage this group pays in taxes.

In fact, although this group's tax burden will drop by 3 percent, when all is said in done, they will be paying a larger portion of the diminished tax burden, at 51.4 percent rather than 50.8 percent. That's one reason why the new tax code is more progressive.

It is easy to be confused by Mr. DiMillo's numbers because sometimes he is talking about just income taxes and at other times about overall tax burden (that includes both income and sales taxes). It is further confusing because he sometimes uses figures from the enacted law and at other times pulls from an earlier version.

Conversely, the legislators who have championed tax reform have always tried to present the numbers fairly. We've never hidden the fact that the new plan will increase income taxes on a small percentage of Mainers (about 4.5 percent), or that after new sales are included, the overall tax burden will go up on a slightly larger number of Mainers.

Indeed, we've been pleased that we can achieve a meaningful change in the code and still bring direct tax relief to nearly 90 percent of all Mainers.

Remember, the reduction in taxes is an added benefit to the purpose of tax reform; such efforts are undertaken not just to provide tax relief, but to achieve broader goals, including fairness and stability.

Our opponents continue to question how much tax relief will be provided and who will get it. Their approach is divisive and their numbers are often wrong. But more important, they are missing the point.

Tax reform was intended to have multiple goals. Just as important as lowering tax burden is that LD 1495 defines Maine as a state with lower tax rates – and that is attractive to businesses ready for investment.

Equally important is that LD 1495 will result in more stable state revenues, moderating both the peaks and valleys that have created such "structural gap" problems over the years.

If the Republicans are successful in their attempt to bring about a people's veto, Mainers will not only lose out on income tax breaks, but also will lose the new ability to apply for "Circuit Breaker" property tax refunds when they file tax returns.

Another feature of LD 1495 is the repeal of the current meals tax applied to some assisted living and retirement homes. That onerous tax will continue if the Republicans are successful.

The...


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