To the Editor:
Desperate to take back the Maine Legislature, the Democrats have decided the best argument is to make you believe the changes in Augusta this past year would hurt Maine’s poorest and only help the wealthy.
A parade of liberal-spending legislators has gone on radio, in multiple newspapers and the Internet to tell you Maine’s lowest-income earners pay more than 17% of their income in Maine taxes each year, while the wealthiest only pay 10%. Our citizens deserve to fully understand the argument, to have all the facts presented and to then decide for themselves who is telling the truth.
Rep. Seth Berry of Bowdoinham (with echoes from Craven, Rotundo, Bryant and others) seems to be the flag bearer for the argument. When I questioned the numbers, he arrogantly suggested I check with Dr. Michael Allen of the Maine Revenue Service. Unfortunately for him, I did so.
What I found can only be described by Samuel Clemens (a.k.a. Mark Twain) as a combination of “lies, damned lies and statistics.” The data is broken down into specific categories: sales tax, excise tax, property tax, income tax and business taxes hidden in items we buy every day. More telling are some of the assumptions created to meet the numbers. The biggest myth is that the overall Maine tax burden is 17%, which is simply not true.
Berry used old data as supplied to him and other Democrats by the Maine Center for Economic Policy (MeCEP), a liberal think tank that helps perpetuate this myth. Even though more recent numbers could be used, MeCEP chooses to keep the older data on their website. I found this out simply by asking Dr. Allen for the very same formula and comparing the numbers.
The 2013 figures are available based on tax law changes put forth in Augusta this past year. The more recent data shows Maine’s lowest income brackets will now pay only 15.25%— not the 17.06% that MeCEP and those who support them wants you to believe. Under Republican leadership, it is clear that taxes have been reduced by a pretty significant factor (12%) for this income bracket. Maine’s highest income brackets went from 11.29% to 10.89%, a drop of only 3.7%.
We could ask why MeCEP would purposely use old data when newer data was readily available, but I think we all know the answer to that. Clearly, taxes in Maine were higher under previous Democratic leadership than they are now and moving forward.
The second faulty argument is that the burden of taxes will shift to local property taxes. While that is possible, there are two errors in the argument we need to accept. First, the 2009 data showed that those in Maine’s lowest income brackets would pay 6.91% in property taxes after reductions for Circuit Breaker programs and homestead exemptions. That same data for 2013 shows 6.83% net, again a reduction in how much Maine’s lowest income earners would pay.
Maine’s highest earners would actually see an increase from 2.99% in 2009 to 3.01% in 2013. Exactly who carries the burden now versus then? Let’s not forget that the data does not take into consideration that if you live in subsidized housing, then some portion of those property taxes are paid by others.
Third is the amount spent on excise and sales taxes. In 2009 that number—by their own admission—was 7.20%, and in 2013 that number is only 5.82%. Again, it’s a tremendous reduction in that portion of income spent for taxes.
At the other end of the income bracket, that change goes from 1.65% in 2009 to 1.64% in 2013. But that’s only the tip of the argument on this one.
If you believe that Mainers who are earning $12,000 are spending 3.03% of their income in sales tax, consider this: you need to spend $7,272 on taxable goods to pay sales tax of $363.60, which equals 3.03% of $12,000. I don’t know too many people earning $12,000 annually that could even consider spending at that level when they have rent, groceries, utilities and other bills to pay each week.
That very question forced me to dig even further into the calculations, as is my nature as an accountant. Maine got its spending data from a federal report called the Consumer Expenditure Study (CES), which analyzes how we spend our money and on what categories. That federal report has minor flaws, such as not considering local economies or the costs of various markets and geographic regions. But, more importantly, that particular report also adds income other that that earned by employment or retirement savings and pensions (which is what MRS uses exclusively).
The CES adds to the base income items such as rental subsidies, food stamps and other forms of public assistance, plus any private assistance, such as churches and other non-profits that may help in some small way. In Maine, a single parent—as Rep. Berry uses for his example—earning $12,000 would likely qualify for rental assistance, food stamps, free health care coverage and other items, making the true income from all sources (and thus used to pay these taxes) closer to $24,000 annually.
The CES also includes federal tax credits, which would add an additional $3,500 to the mix. Rep. Berry’s imaginary family now has almost $28,000 and pays $1,830 in all Maine and local taxes each year—or 6.5%. In addition, some people in the lowest bracket are seniors on a fixed income, living in a home they have paid for and are now paying property taxes on. For many of them, the tax burden is met by paying for property taxes out of years of savings or sales of important personal possessions, none of which is considered in the calculations—it’s simply based on earnings.
Furthermore, the CES is flawed because it does not include cash earnings unreported, nor does it consider that some people in this category might only be there for a year or two due to heavy business losses or one-time large deductions to their taxable income.
I want to make it clear that I am not opposed to helping those who are in need, and I believe anything we can do to reduce everyone’s tax burden will be good for Maine’s future. Everyone deserves our help. My point is not to make light of the dire financial situation that we sometimes find ourselves in, but rather to allow you to see how Democrats and their handlers are creating a class-warfare argument that claims you are somehow not getting the fair end of the deal. As I’ve shown, nothing could be further from the truth.
While some taxes might appear higher for the poorest Mainers, it could be argued that they spend a greater portion of their income on items in those categories. Considering their limited funds, it makes the variance between income brackets look bigger than it truly is.
In summary, 2013 Maine’s lowest five wage categories (those with annual incomes up to $35,269) will pay 2.71% of all state income taxes collected, while Maine’s three highest annual income levels (above $61,768) will bear 88.33% of the burden.