But could Maine use the federal money fast enough to swiftly put lots of Maine people to work, and in so doing quickly stimulate tax revenues? Jeff Faux, a former Mainer and the founder of the Economic Policy Institute, yet another DC think tank, says there is some fear in Washington that “there is not enough capacity in the states to put the money out efficiently and effectively.”
The state should hustle to be fully geared up for when the feds dole out the cash, says Messier, the UMF economist.
“Let’s capture the green market,” he suggests — through, for example, state investment in building wind turbines. “We have the skilled workforce in the Bath Iron Works area,” and we have the wind to get some of those turbines rotating.
Maine’s constitution allows the state to borrow for capital improvements — for roads, schools, water systems, and for aid to outfits that do research and development. The state finances these things regularly with bond issues in the hundreds of millions of dollars.
“The Maine Legislature should consider a series of green-economy bond issues, focused on energy conservation in public buildings, schools, hospitals, nonprofits, and in the residential sector,” says Thomas College economist John Joseph.
Joseph, who in the 1970s headed up the state energy office, believes, like Messier, that quick state action “will put Maine ahead of the curve” when Washington’s green dollars become available.
The federal stimulus money in Maine will be spent on many non-green things, too, like plain old roads and bridges. But Joseph and Messier see Maine possessing an advantage in making green proposals.
“Maine has a great endowment of natural resources that are the foundation of renewable energy such as wood, water, wind, agriculture, and clear skies,” Joseph says.
Among many proposals on Governor Baldacci’s desk right now, says the Economic and Community Development Department, is one for a $150-million intensification of research and development of new technologies, including wind power.
“Committed leaders” and public understanding both are necessary for Maine to become a leader in the new green economy, Joseph says.
Alternative 3: Broaden the sales tax, targeting the well-off and visitors
Like the rest of the country, the state’s economy has shifted from manufacturing and selling goods to selling services, but services are mostly exempt from the state’s 5-percent sales tax. In 2007, Maine taxed 25 services — electricity was one — compared to Hawaii’s 160.
Democrats in the Legislature have recognized this problem, and they have tried to broaden the sales tax. But Republicans and the Democrats’ own Governor Baldacci, who in fiscal matters often acts like a Republican, have stymied them, even when in 2007 the Democrats wanted to trade a reduction in the highest income-tax rate for a sales tax that covered more services. That “revenue-neutral” move would have dampened the ups and downs of the sales tax’s receipts due to the swings in the business cycle. But the business lobby opposed it.
The sales tax, which collects about $1 billion a year (compared to $1.3 billion for the income tax), could bring in a great deal more. Maine Revenue Services has estimated that $432 million in sales taxes are being lost this fiscal year because we are not taxing finance, insurance, real estate, professional, scientific, and technical services.