By Sen. John Patrick
The governor has said, on numerous occasions, that the state must pay its bills. No one in the Legislature would dispute that principle of fiscal responsibility.
Yet, the governor presented, and Republicans pushed, an unfunded $800 million per year cut in taxes and state revenues, while not paying more than $700 million of state government bills.
Those tax cuts amount to 26.7 percent of the state’s $3 billion of annual General Fund appropriations.
Paying our bills is most important. Reducing taxes is also very important, but being fiscally responsible is even more important. We can pay our bills and reduce our taxes in a much more responsible manner that won’t saddle our children and grandchildren with insurmountable debt.
The substantial loss in state revenues is made worse by the inequitable distribution of tax cuts among Maine households, and the absence of state investments in the economy and job creation. According to the Maine Center for Economic Policy, 80 percent of the $800 million of tax cuts are enjoyed by the top 10 percent of households.
For example, Maine households in the top 10 percent of household income earning $122,000 or more will enjoy average savings of $5,384, and households with incomes of $366,000 will enjoy average savings of $21,638 per household in tax cuts. On the other hand, an average Maine household earning between $27,000 and $35,000 will enjoy an average tax cut of $167, while the 136,000 lowest income households will enjoy a tax cut of $1.
The governor did not propose to invest in the state’s economy or in jobs. The only investment proposals came from the Legislature, which adopted $98.7 million of bonds for investment in transportation, waste water, and drinking water infrastructure, research and development, higher education, and preservation of working waterfronts. This bond package would support 3,200 jobs.
The governor vetoed the research and development bond, which would have funded technological innovation, new products, and new processes. In addition, the governor will not release any of the bonds even if they are approved by the voters in November 2012. By refusing to release an additional $40 million of voter authorized and unissued bonds, the governor is denying support for another 2,000 jobs.
An independent analysis found that ongoing investment in renewable energy could easily result in the creation of 11,700 jobs in Maine and increase our gross state product by $1.1 billion. Maine leads the region in renewable energy, which reduces Maine’s dependence upon foreign oil and the outflow of taxpayer dollars.
In the meantime, the $800 million of lost revenue from tax cuts each year in the next biennium and thereafter (primarily for the top 10 percent of Maine households), prevents the state from paying its bills.
The state owes:
— $185 million each year in General Purpose Aid to Education to meet its statutory obligation to fund 55 percent of the total cost of education;
— $153 million to Maine hospitals, which can be matched with more than $300 million in federal funds;
— $40 million to $45 million each year in revenue sharing provided to Maine’s municipalities;
— $20.2 million each year in the circuit breaker property tax relief program to comply with previous statutory changes; and
— $200 million to restore access to health insurance and prescription drugs for 50,000 Medicaid-eligible Maine residents, including the elderly, disabled, children and low-income working adults.
A more sensible approach is for Maine to pay its bills and to invest in the economy. The state could enact a modest income tax cut initially, and expand the cut when all of its bills have been paid.
In addition, by funding 55 percent of the cost of K-12 education, and fully funding revenue sharing and the circuit breaker, both residents and businesses will enjoy significant property tax relief.
Sen. John Patrick, D-Rumford, serves on the Veterans and Legal Affairs, and Inland Fisheries and Wildlife Committees.