To the Editor:
Last Thursday I attended a presentation on tax reform convened by the group Fed Up with Taxes. The event featured a presentation by Al DiMillo, an accountant and self-proclaimed Democrat. DiMillo is no fan of the recently passed proposal that effectively creates a flat income tax rate of 6.5 percent and broadens the sales tax to increase revenues from non-residents and stabilize revenues over time.
With any change in the tax structure there will be winners and losers. Mr. DiMillo’s family is among the losers. His opposition is firmly entrenched in this fact. He is all too happy to discredit any analysis by anyone other than himself and he has quickly become the darling of those seeking to repeal the reform.
I work for the Maine Center for Economic Policy (MECEP). For more than 15 years MECEP has advocated for low and moderate income Mainers when it comes to tax and budget issues. Our long-term support for improvements to the property tax and rent refund program and for the state’s earned income tax credit and other progressive policies is well-documented.
From this perspective, MECEP has wrestled with the subtleties of the current law. On one hand, lowering the top income tax rate and raising the lowest tax rates would appear to put those at the lower end of the income ladder at a disadvantage. So too does an expanded sales tax.
However, these elements are offset by exporting a greater share of taxes to out of state residents (as a result of the expanded sales tax) and targeted relief to low income families in the form of a rebate and a refundable state earned income tax credit advocated by MECEP.
On balance, a commonly used measure of how well a state distributes taxes across income groups ranks the current reform slightly better than the old system. Without question, the new system does a better job stabilizing state revenues. At the end of the day, a lot depends on whether or not you file income taxes and the amount of itemized deductions you have submitted in the past. Those who do not file or who have relied on high levels of deductions, like Mr. DiMillo’s family, will be on the losing end of this proposal.
On balance, Maine Revenue Service projects that 87 percent of Maine families, especially those who file income taxes and earn less than $70,000 will come out ahead with this plan.
Make no mistake, tax policy is complex stuff. Still it would be shortsighted to write off the current plan on the basis of Mr. DiMillo’s analysis or because certain aspects of the expanded sales tax – such as taxing auto repairs – are unpalatable. To determine what the overall package means to you, consider your own spending habits and whether or not you’ve filed in the past.
The Maine Revenue Service provides an online tax calculator to assist in this effort that can be found by searching “Maine Revenue Tax Calculator.”
Garrett Martin, Bremen