Tax reform: the test
The acceptance by Maine’s Democratic leadership of Ronald Reagan’s the-government-is-the-problem, trickle-down economic conservatism was one of the state’s big political developments of recent decades. It was part of a national trend, a turn to the right. But now many political scientists, who see cycles in American politics, believe the country is moving into a liberal phase, which means less deference to the rich and the corporations and a more activist government. They see Obama more a result than a cause. (For more on this, see “Obama Rides the Wave,” by Thomas Edsall, realclearpolitics.com, June 24, 2008.)
So Baldacci’s Augusta seems out of sync with Obama’s Washington. There have been no sightings of a Maine Obama, and most Democrats in the State House continue to sing a Republican song.
A few liberal notes, however, have recently been heard. Whether these notes are the beginning of a liberal chorus will become clearer during a probable confrontation between legislative Democrats and Governor Baldacci over the issue of tax reform — especially, if tax reform includes a tax increase.
The likely run-in with Baldacci is apparent in conversations with Democratic legislative leaders, and it was abundantly evident at MECEP’s January 12 conference on the state budget at the Augusta Civic Center, a beginning-of-the-legislative-session ritual of the Democratic policy elite.
The confrontation, if it occurs, will be over a tax-reform bill — defeated in 2007 by one vote — that, according to Thomas Watson, the Democratic House chairman of the Taxation Committee, is “sure” to return this year. The bill broadened the sales tax to cover more business services, and it raised the meals and lodging tax a percentage point (it’s now 7 percent), thereby “exporting” taxes to tourists. The revenue gained, however, was to be offset by lowering the 8.5-percent top income-tax rate, eventually to a flat 6.25 percent for all taxpayers.
The 2007 bill was defeated because Baldacci, joining with Republicans at the behest of the business community, leaned on then-Senate president Beth Edmonds to change her vote. Expanding the sales-tax base challenges a slew of special interests. The state chamber, bankers, real-estate agents, beer distributors, and others lobbied Baldacci and legislators hard. (See “This Woman Killed Tax Reform,” by Lance Tapley, July 11, 2007.)
That was then. Now, Watson, who was interviewed at the MECEP conference, suggests the provision lowering the income-tax rate might be dropped this year. Thus, a lot more revenue would be generated from new taxes on services, and state programs would have to be cut less.
Now there’s a liberal note.
So, Watson is asked, do you think Baldacci will accept a tax-reform proposal this time around?
“To hell with him,” Watson replies. “I don’t fear a veto.”
He admits, though, that no legislator “except me” is openly discussing the possibility of a tax hike. The Democratic consensus is more like House majority leader John Piotti’s view: He is “very optimistic” the Legislature will pass a tax-reform bill, but he says it will have to be “revenue neutral” like the 2007 proposal. He spoke on the MECEP conference tax panel.