No Income Taxes in Maine? Seriously?

Expecting something from your government for nothing is a bad idea.

Illusion as a Political Art Form

Recently, propped up by public announcements from Maine’s Republican Governor Paul Lepage, The Maine Heritage Policy Center (the leading “free-market” think-tank in Maine) has announced that it will be rolling out a “solid plan” to arrive at “Zero Income Taxes” in Maine. This is not only a misguided idea, it avoids addressing some uncomfortable economic realities.

As costs rise, income taxes are an increasing burden. Reducing government expenses with care is important, but so is maintaining revenues to provide essential services.

By reducing revenues derived from state income taxes to the level that existed in 1994 (as they propose) there would be a gigantic gain in the pockets of many Maine citizens, yet the savings to particular individuals would depend upon where they fall on the income curve.

More importantly, this suggestion ignores another essential reality: the costs associated with government services would not revert to what they were 18 years ago absent divine intervention.

The result, unfortunately, would be the impossibility of delivering those services without dramatic increases in some other income flow. Folks forget that states without an income tax have either another source of revenue to sustain government service or have substandard services.

You can’t have it both ways.

Only seven states (not nine, as they claim) have no income tax. Tennessee and New Hampshire both tax interest and dividend income. Additionally, Texas and New Hampshire make up the shortfall by having some of the highest real property taxes the nation. Alaska reaps it’s revenues from one source: the oil business. Nevada has gambling. It’s a simplistic view that holds that folks who live in states without income taxes pay less overall to fund their state government absent a sugar-daddy. Would we, for example, invoke a “View Tax” on Maine property owners as they do in New Hampshire, or Texas’ “MUD” tax?

Already strained by cuts in funding, without income tax revenues or some new source of funds, Maine’s ability to allocate money to infrastructure maintenance and repair, education, essential health services, public safety, administrative and judicial services and environmental and recreational resources would collapse.

So exactly where are the dollars necessary to balance Maine’s budget going to come from assuming providers of goods and services to the government aren’t going to agree to drop their pricing to 1994 levels?

I look forward to reviewing The Maine Heritage Policy Center’s proposal.