How do we lower Maine’s tax burden?

Taxes are a complicated thing. You are taxed in many ways, not just on your income, and not just by one government. Indeed, American federalism guarantees that you are in fact taxed by your national government, you state government, your county government and your town government, to say nothing of the “fees” you pay to quasi-governmental organizations like licensing boards and industry funds.

This can make it difficult to get a handle on just how much tax you actually pay.

Monday was April 15, known with dread around the country as “tax day” for the federal income tax deadline it represents.

This Feb. 13 photo shows multiple 2018 forms from the Internal Revenue Service. (AP Photo/Keith Srakocic)

It also happens to come near another, rather depressing date: Tax Freedom Day, which was on Tuesday, April 16 this year.

What is Tax Freedom Day? Put simply it is the day that you stop working for the government, and start working for yourself. Prior to Tax Freedom Day, every penny you earn goes to some level of government.

According to the Tax Foundation, Americans will pay $3.4 trillion in federal taxes this year. They will also pay roughly $1.8 trillion in state and local taxes. In total, the $5.2 trillion that we pay in taxes represents 29 percent of this country’s income. If our money was pooled collectively, it would take until April 16 to pay off our government bill.

That’s a lot of money, and just for the record it only covers tax receipts. It does not take into account the cost of actual federal spending and debt. If it did, Tax Freedom Day would actually occur the second week of May.

But let’s be clear, despite all that, it is absolutely better to live in some places than in others. If taken individually, certain states are far less confiscatory.

In Alaska, for instance, your Tax Freedom Day is March 25. In Maine, it is almost an entire month later, on April 20.

Put another way, in Maine you have to work about a month longer before you are granted the right to spend your own money than in Alaska.

There are other ways of quantifying tax burden, of course.

Earlier this month, WalletHub released their study of state tax burdens, and the news for Maine was not good. We ranked as the third worst state in the country, behind only New York and Hawaii, on overall tax burden.

WalletHub looked at property taxes, individual income taxes, and sale and excise taxes in its assessment. This prevents the analysis from focusing only on income taxes, and giving a pass to states that have higher taxes in other places.

Maine confiscates 10.84 percent of your income, while Alaska, the best state on taxes, takes only 5.1 percent.

Comparisons between Maine and New Hampshire have always been made, including by me, and the pushback on that comparison has always been that New Hampshire has a higher property tax burden, which makes up for its lack of income or sales tax.

And it is true, New Hampshire has a high property tax burden. The problem is that Maine does too. We have the fifth highest property tax burden in the country. So, we both have crummy property taxes, but at least New Hampshire doesn’t soak you on income and sales.

Maine actually stacks up poorly against every regional and economic competitor it has. This is especially true of the three states that I consider the most important: New Hampshire, our next door neighbor ranks 46th, Massachusetts, the regional economic magnet ranks 19th, and Florida the climate magnet ranks 47th.

Put more simply, in the three places that most attract potential economic development that could end up in Maine, we are comically uncompetitive at virtually every level of taxation.

So what do we do about this?

Gov. Janet Mills and her allies in the administration say to you either “nothing,” or “make it worse.” She views it as a triumph that her budget does not propose tax increases, even though she basically guarantees future increases will be necessary to afford state government appetites. The more progressive elements of her party in the Legislature have proposed more tax and fee hikes than I can even keep track of.

Even those on the left who pretend that they see this as a problem are remarkably obtuse about its solution. Spend more money on revenue sharing, argued a Portland Press Herald editorial recently. This, despite it being a program which has no correlation to lower property taxes.

Spend more. It is the only idea they have. And it happens to be the very idea that caused this problem in the first place.

Perhaps instead, we should be using our record revenues and strong financial position to actually reduce taxes on the Maine people.



Matthew Gagnon

About Matthew Gagnon

Matthew Gagnon, of Yarmouth, is the Chief Executive Officer of the Maine Heritage Policy Center, a free market policy think tank based in Portland. Prior to Maine Heritage, he served as a senior strategist for the Republican Governors Association in Washington, D.C. Originally from Hampden, he has been involved with Maine politics for more than a decade.