Kathleen Chase, Maine State Representative

Saturday, June 27, 2009

GOP response to governor's weekly address for June 27-28, 2009

Republican response to the governor’s weekly radio address for the weekend of June 27-28, 2009

Greetings, this is Kathy Chase, State Representative from Wells. It is my honor to deliver the Republican (radio) response this week.

On June 11th, the Maine Legislature passed the most radical tax overhaul in 40 years. More specifically, the Legislature’s Democrats passed it, because in the House, not a single Republican voted for it. The next day, Governor Baldacci signed the bill into law. And now a drive to repeal this law is under way in hopes of killing it before it would take effect on January 1st.

Last year, another big Democratic tax increase on beer, wine and soft drinks was easily defeated by a people’s veto. The plan this year is for a repeat performance – to get another referendum on the ballot in November so the people have the final say on whether they want this massive expansion of the sales tax.

It’s unfortunate when Maine voters have to keep fixing the damage done by the Legislature, but at least we have the constitutional right to do it. And in this case, we would be negligent if we allowed such a flawed law to remain on the books. A coalition called Still Fed Up With Taxes will lead a petition drive to collect the required number of signatures, about 55,000. If they succeed, voters will have a choice. If they fail, this regressive and expensive tax will become the law of the land.

As a member of the Taxation Committee, I watched this legislation evolve for months. The basic idea is to lower Maine’s top income tax rate of 8.5 percent to 6.5 percent and pay for the lost revenue with an expansion of the 5 percent sales tax to a vast new array of services and activities. The whole list takes up several pages. It also would export $55 million to tourists by jacking up the meals and lodging tax to 8.5 percent. Mainers will pay the higher meals tax, too, of course, which will likely have an adverse effect on restaurants.

That is the plan as it stands. In theory, the tax shift would be revenue neutral – the state would still take in the same amount of money. And also in theory, the plan would treat taxpayers equally – what they paid out in additional sales tax would be cancelled out by the income tax cut.

That goal of taxpayer equality is already out the window. According to an analysis by Maine Revenue Services, some 85,000 Maine families will be losers in this new tax system that resembles a game of tax roulette.

Republicans opposed this plan because we thought it was irresponsible to totally transform the tax system during a period of fierce economic turmoil. The impact on state revenues is too unpredictable right now and could set the stage for greater budget problems.

We opposed it also because it really hammers older Mainers living on fixed incomes. A couple surviving on Social Security pays little, if any, income tax; so they won’t get the benefit from the income tax reduction. However, they will face the sales tax on a huge number of services, things like car repairs, movies and even house cleaning. If they decide to move to Florida to escape Maine winters and taxes, the state will hit them on their way out the door by taxing moving services.

Newspapers are now running letters to the editor from older Mainers who have figured out how this new system will affect them. They will be among the losers in a tax overhaul so complicated that most legislators probably don’t even understand it, especially the ones who voted for it. Why else would Democrats approve a plan that punishes older Mainers so severely, especially Mainers who have lived here for years and paid the state’s high taxes throughout their careers? Now that they are entering their golden years of retirement, along come the Democrats to get at their money one last time.

Low-income Mainers of all ages will take a hit. Maine’s income tax brackets range from 2 percent to 8.5 percent. Under this plan, all brackets will be eliminated and a 6.5 percent rate will apply to everyone. The plan also eliminates the standard deduction. Maine’s progressive tax system would be replaced by a complex scheme of household credits that may or may not work as the authors envisioned. We do know that the credits will phase out as one’s income rises.

It’s also disturbing that the final plan seems to have been changed by politically connected insiders and special interests to remove taxes on activities enjoyed mostly by affluent residents. The first plan passed by the Democrats in early June included sales taxes on golf greens fees and ski lift tickets. The governor refused to sign that bill and came back a week later with a revised version, LD 1495. The tax on greens fees and lift tickets was gone, but the tax on miniature golf was still there. So golfers on the real courses are protected, but the hammer falls on kids playing mini-golf. The governor also wiped out the increased property transfer taxes on houses selling for more than $500,000.

The Democrats always claim to stand for the little guy. In this case, ironically, they stood up proudly for the affluent while throwing retirees and the working poor under the bus. It’s too bad more deserving services didn’t have the same kind of lobbying muscle as the golf and ski industries. The governor didn’t eliminate taxes on diaper services or car repairs. He left in the taxes on repair of shoes and clothing, on rug cleaning and car washes and countless other basic services used by hundreds of thousands of Maine residents.

This so-called tax reform plan never should have passed. Now that more Mainers are discovering the damage it does, a backlash is setting in. We can only hope that the repeal provision gets on the ballot and the voters will veto yet another monstrosity to emerge from the State House.

This is Kathy Chase. Thank you very much for listening.