The work of the Legislature

By Stephen Bowen | Jun 20, 2009

To gauge the success of the legislative session that ended last week, it is necessary to establish just what it was the Legislature needed to do.

It needed to do plenty.

Only weeks into the legislative session, the Maine Development Foundation released its 2009 Measures of Growth report, the 15th edition of its annual survey of Maine’s economic health. The news, as it has been for years, was bad.

Maine ranked 35th in the nation in per capita personal income, where it has remained, more or less, since 1991. Relative to the rest of the nation, Mainers have not seen their incomes grow for almost 20 years.

Several of the report’s other rankings make clear why this is so. Maine’s tax burden remains well above national averages, as do the costs of health care and energy. The productivity of Maine’s work force trails the national average and the cost of doing business in Maine remains stubbornly high. Rates for college degree attainment rose slightly, but so did those nationally, leaving Maine’s ranking on this important indicator unchanged.

So the Legislature had plenty to accomplish when it went to work in January, but by the time legislators went home late last week little had been done to put Maine on the right track.

The Legislature needed, for instance, to lower Maine’s tax burden, thereby putting more money into the pockets of Maine’s people and its job-creating businesses. Instead, it passed one of the biggest tax shifts in Maine history. The income tax rate will be dropped under the new law, but Mainers will now pay the 5 percent sales tax on all kinds of things they never paid it on before, effectively “nickel and diming” the Maine economy to death. The bill also raises the restaurant and lodging tax, as well as the tax on rental cars, hitting hard one of Maine’s most critical industries.

The increases in restaurant, hotel and rental car taxes were designed, the bill’s supporters said, to “export” some of our taxes to tourists. They said tourists will pay so much more in taxes that the bill will actually result in a lower overall tax burden for Maine residents. How much will each of us save under this long-awaited tax overhaul? The bill’s authors estimate $160 a year.

How to spend this massive windfall is something you can decide while taking time off from looking for a job.

That $160 isn’t going to be nearly enough to offset looming property tax increases, by the way, which are coming as a result of the state slashing funding for a whole host of property tax relief programs, from the Homestead Exemption to the Tree Growth program. Cuts to state school spending may result in property tax hikes as well if local school districts don’t trim their own budgets to compensate for the loss of state revenue.

The Legislature also needed to do something about Maine’s staggering health-care costs. According to the Measures of Growth report, health-care spending in Maine now consumes “just less than 20 percent of gross state product,” well above the national average of 13.4 percent. In short, high health-care costs are slowly consuming Maine’s economy, creating ever-greater expenses for the state’s residents and businesses.

Unfortunately, the Legislature defeated a bill that would have allowed residents to buy health insurance from companies in the other New England states, where it is almost always cheaper. An Anthem plan with a $3,000 deductible costs $2,700 per month in Maine, for instance, but only $1,500 per month in New Hampshire, a savings of thousands of dollars per year for the same insurance policy.

What the Legislature did instead was to enact a new tax to pay for the failed Dirigo Health program, which was supposed to be providing health coverage to 120,000 Mainers by now, but is 110,000 short of that goal. The Legislature’s solution to making health insurance in Maine more affordable, therefore, was to tax it.

Another thing on the Legislature’s to-do list was to deal in some meaningful way with the failed school district consolidation law, which has ended up costing school districts a fortune. Despite dozens of bills to amend or repeal the law, the Legislature did nothing. Luckily, because of a citizen initiative on the November ballot, voters will have a chance to vote for a repeal of the consolidation law this fall. Until then, though, school districts across Maine, despite facing declining state funding, must still comply with the law and absorb the added costs it brings.

So with Maine facing truly daunting challenges in the years ahead, the Legislature’s response was to raise taxes with a tax shift bill, raise taxes through cuts to property tax relief programs and school funding, raise taxes on health insurance, and raise taxes through a failure to reform school district consolidation.

Mark Twain once said that “no man’s life, liberty or property is safe while the Legislature is in session.” How right he was.
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