It's gospel under the State House dome — dogma in what could be called the trickle-down religion — that if taxes on the rich and the corporations were reduced, lots of moneyed people would make their residence in Maine instead of places like Florida, contributing massively to tax collections; and lots of businesses would move to Maine or start up here, hiring workers right and left.
Those were major selling points of the now-famous Gang of 11's sweeping tax overhaul proposed at an Augusta news conference on May 1.
The Gang of 11 is a bipartisan group of legislators (five Democrats, five Republicans, one independent) who want to dramatically reduce income taxes, giving a windfall to the rich. They also want to raise the lodging and meals tax and double the tax on beer and wine. Most dramatically, they want to hike the sales tax rate from 5 to 6 cents on the dollar and greatly broaden its base, applying it to most services and, for the first time, to groceries.
At the news conference, the plan's chief architect, independent Senator Richard Woodbury, was asked what data he had to back up the assumptions that, if taxes were reduced, the Florida-to-Maine and new-business booms would occur — given that the state's tax economist had said he didn't even know how data could be collected to test the Florida-Maine theory, and given that academic research had shown taxes are a minor factor in business-relocation and start-up decisions.
Woodbury, who has a PhD in economics from Harvard, looked embarrassed and stepped back from the podium, deferring to a more glib politician, Republican Senator Roger Katz, a lawyer. He assured reporters, "Everyone in this room knows five people who would come back" to Maine from Florida.
That statement didn't even rise to the level of anecdotal evidence.
OFFSETTING AND OFF-PUTTING
At first glance, the Gang's tax plan, LD 1496, seems aimed squarely at the poor and middle class. However, to offset the effects of the sales-tax changes, it provides sales-tax and property-tax credits to lower-income and many middle-income people, including a $50,000 property-tax Homestead Exemption.
The plan also would repeal numerous tax breaks, including many enjoyed by the rich and the corporations. On the other hand, it would eliminate the estate tax, a move that only the very rich would enjoy.
Although the Gang has made dollar estimates of what all these changes would mean for taxpayers, the group admits its numbers are rough, and at a May 17 legislative Taxation Committee meeting members of both parties wondered aloud what the real effects would be.
How many people would file for the credits? Only 45 percent of those eligible now file for the Circuit Breaker low-income property-tax and rent refund program. The political worries were etched on the unsmiling committee members' faces.
Woodbury, speaking for the Gang of 11 and responding to the backlash against their plan, proposed that changes be phased in over a year and a half. He also dropped a provision to reduce the corporate income tax and said the sales tax hike shouldn't be applied to heating fuel.
TRICKLE- DOWN VERSUS TRICKLE-UP
Trickle-down was perfectly expressed as long ago as 1896 by Democratic presidential candidate William Jennings Bryan in his legendary "Cross of Gold" speech: