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Governor’s Address: Experts recognize that lowering taxes would make Maine more competitive

Legislators may not understand how taxes work, but experts recognize the tax reforms in my budget would make Maine more competitive and more prosperous.

Dear Maine Taxpayer,

The non-partisan Tax Foundation has reviewed the tax changes in my budget, which reduces individual income taxes, lowers corporate taxes, broadens the sales tax and eliminates the death tax. They called my plan “a recipe for a more competitive state.”

They also liked my effort to simplify the income tax and reduce it to a flat tax of 5.75% in 2020. We have also proposed lowering the top corporate rate from 8.93% to 8.33%, which would still be relatively high compared to the national average.

But the Tax Foundation said this reduction would make Maine more competitive with its neighboring states.

The Tax Foundation also knows the death tax is harmful to economic growth, so they are pleased to see my proposal to eliminate it. Only 14 states and Washington, D.C. still impose a death tax. Most states are moving away from death taxes.

They are especially harmful to many of Maine’s families who own small businesses. They usually do not have the resources to spend on estate tax planning, which can make it difficult to pass the business on to family members.

The Tax Foundation is also in favor of our effort to broaden Maine’s sales tax base to include some services. The state’s 5.5% sales tax rate would not increase. But it would be applied to amusement and recreation services, some installation and maintenance services and personal services.

Services such as carpentry, plumbing and electrical work, as well as motor vehicle repairs, will remain exempt from sales tax.

Decades ago, the United States economy consisted mostly of goods. But now, services comprise about two-thirds of the economy. Maine’s sales tax is already low compared to the national average. By exempting all services, our sales tax base is increasingly narrow, which leads to a reliance on other taxes, such as the income tax.

One of the most transparent ways to collect tax revenue is through the sales tax. Complicated tax codes, graduated income tax rates and tax brackets are confusing. But the sales tax is easier to understand. Mainers can see how much tax they are paying because it is printed right on their receipt.

The Tax Foundation said our proposal to broaden Maine’s sales tax base is the “correct call for modernizing a state’s sales tax code.”

Although our proposals are far-reaching, the Tax Foundation said policymakers should seriously consider them. Our efforts to broaden tax bases and lower rates overall will make Maine more competitive and improve our economy.

Now it is up to you to let your legislator know how you feel about taxes and where your dollars are best spent.

Thank You,

Paul R. LePage

Governor

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