Few doubt upper-income folks can afford it. See the accompanying graph, created by sociologist Lane Kenworthy, comparing income growth for the bottom 20 percent of Americans, the middle 60 percent, and the top 1 percent. In 1979 household income for the top 1 percent averaged $325,000. By 2005 their income had increased to about $1.1 million. But for the poorest 20 percent, average income was $14,500 in 1979 and only $15,500 in 2005. For the middle 60 percent, average income rose from $42,000 to $51,000 (all figured in 2005 dollars).
As it is now, Maine’s personal income tax is not very “progressive.” It hits the wealthy at the same rate, 8.5 percent, that it taxes a married couple making only $40,000 a year. There are no higher brackets.
But what if there were? Calculations made at the Phoenix’s request by the state’s tax bureau, Maine Revenue Services, show that if the rate were increased from 8.5 to 12 percent on just income in excess of $200,000 for married couples filing jointly (with the same rate for income in excess of $100,000 for a single person), $102 million would be raised in tax year 2009 (the calendar year), with $204 million raised for 2009 and 2010 combined.
In another scenario, we could raise the new top rate to only 10 percent, but also lower the threshold to pay it, to income in excess of $80,000 for married people. Maine Revenue Services says this would bring in $86 million in 2009 — or $172 million over two tax years.
These rates could be temporary. The new tax could be called a “recession surcharge.” In any case, the hit to financially comfortable people would be lessened because they can deduct state taxes on their federal returns.
Alternative 2: Through bond issues, put people to work building a green Maine
Zandi, at Economy.com, calculates that a dollar spent on infrastructure, like building roads, stimulates $1.59 in economic activity. But with his infrastructure projects, Obama wants to lick more than the recession. With a green infrastructure, the United States will be less dependent on insecure foreign oil. And oil, a nonrenewable resource, will be inevitably more expensive. Plus, an economy that conserves energy and relies on renewable energy sources will reduce the carbon dioxide cars and factories belch into the air, shrinking our contribution to global warming. As former vice-president Al Gore wrote in November in the New York Times: “The bold steps that are needed to solve the climate crisis are exactly the same steps that ought to be taken in order to solve the economic crisis and the energy security crisis.”
Obama’s goal of creating 3 million new jobs over two years could largely be met by the Center for American Progress’s plan for a $100-billion, two-year investment in weatherizing buildings, ramping up mass transit, harnessing the wind and sun, and other green projects, which the Center says will produce 2 million jobs. Under this plan, Maine’s share would be $396 million, theoretically creating 9100 jobs. The Center is a DC think tank whose CEO, John Podesta, heads up Obama’s transition team.