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Faith-based taxation

Trickle-down is triumphant
By LANCE TAPLEY  |  May 23, 2013

"There are two ideas of government. There are those who believe that if you just legislate to make the well-to-do prosperous, that their prosperity will leak through on those below. The Democratic idea has been that if you legislate to make the masses prosperous their prosperity will find its way up and through every class that rests upon it."

Trickle-down is also known as Reaganomics. It has dominated American and Maine politics since Republican President Ronald Reagan's two terms in the 1980s. Almost all in the GOP subscribe to it, but the five Democrats in the Gang of 11 illustrate that trickle-down also has a solid following within their party.

Still, in this legislative session the Gang of 11's plan is unlikely to survive as a package. Some of its particulars alienate Republicans; many alienate Democrats. And there are alternative tax proposals being offered.

On the accompanying chart are the major proposals, including the Gang's ideas. Whatever tax measures the Democratic Legislature adopts probably will be contained within the budget now being put together by the Appropriations Committee as an alternative to Republican Governor Paul LePage's budget.

BUDGET WORRIES

Aside from the perennial enthusiasm to lower taxes on the rich and corporations, taxation is a heated topic this session because expected tax collections don't even fund absolute-bare-bones state-government operations. There's still a $325-million gap or shortfall over the next biennium, the two fiscal years beginning July 1.

To fill the gap, LePage proposes cutting the state's basic aid to towns and cities ("revenue sharing") by about $100 million a year, requiring municipalities to slash services or raise property taxes. He also saves $82 million by reducing the Circuit Breaker and the current $10,000 Homestead Exemption.

A decent budget, says the Maine Center for Economic Policy's Garrett Martin, would need in the neighborhood of $650 million in additional revenues. That sum would not only eliminate LePage's cuts to municipal aid; it would also, for example, make unnecessary the governor's proposed cuts to Low Cost Drugs for the Elderly and Disabled and restore previously cut funds to Head Start.

Although some legislative Republicans are complaining about the revenue-sharing cuts, most support the no-new-taxes part of LePage's budget, which retains the big individual income-tax and estate-tax cuts enacted in 2011 by a Republican Legislature (with most Democrats going along). Those cuts are largely responsible for the shortfall.

In those cuts, 41 percent of the individual-income-tax benefits went to families making over $121,000 a year. Cutting taxes makes it hard to maintain government services, but Republicans believe government is too big.

At this point in the session, pressure for a budget solution is increasing rapidly. If a budget isn't adopted before the fiscal year ends, a state-government "shutdown" occurs, which LePage is implicitly threatening.

A shutdown means only services deemed essential (like state police and guards at the prisons) continue while the politicians try to resolve what the public may perceive as a mess worthy of impeachment — if not tar and feathers. A shutdown last occurred in 1991. It lasted for three weeks.

REGRESSIVE, PROGRESSIVE

Trickle-up and trickle-down are connected to two policy-wonk words. Depending on how they hit the poor, middle class, and rich, taxes are either progressive or regressive. As Garrett Martin puts it, progressive "means you pay more as your ability to pay goes up," and regressive "means you pay more when your ability to pay is lower."

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  Topics: News Features , Roger Katz , Richard Woodbury , trickle-down ,  More more >
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