Over the past seven years, the state of Maine has made enormous strides in reducing the tax burden on its citizens. But tax relief at the state level, as we all know, is only part of the equation.
That is why I am very encouraged to see that Washington is now looking at tax reform on a national level. As a business owner and as a taxpaying citizen, I can tell you there is much important work to be done.
The United States’ tax code is burdensome and overly complex, especially for small businesses that provide a large number of jobs throughout the country. An overhaul of the system that puts more money back in the hands of citizens and encourages job growth is long overdue.
It is discouraging to note that the United States now has the highest corporate tax rate among the 35 advanced economies in the Organization for Economic Cooperation and Development. It is more than 16 percent higher than the worldwide average.
History has shown, time and time again, that punishing businesses by imposing higher tax burdens creates a disincentive for businesses to expand and hire workers. Here in Maine, we were already seeing the negative impact the ill-advised surtax on small businesses was having until the Legislature wisely eliminated it. Conversely, when the tax burden on businesses is lifted, investment and economic growth follow.
If the United States is to truly remain a global leader in economic development, we cannot have the dubious honor of being among the highest-taxed nations.
Trying to decipher the American tax code has become an industry unto itself over the decades, due to its complexity. Consider this: in 1935, the standard Form 1040 was only two pages long. It’s now up to 241 pages. According to the Tax Foundation, the tax code itself is more than six times as long as it was in 1955. U.S. taxpayers spend more than 6 billion hours every year attempting to comply with the code.
The tax code is another obstacle for America’s small businesses, which spend up to $16 billion annually on compliance costs.
So often we hear about U.S. companies moving their operations overseas. The cheaper cost of labor is often cited as the reason, but many of them also flee our borders to escape our costly and complicated tax structure.
As a business owner and former educator, I understand that taxes are a fact of life if we are to have good schools and provide basic services to our citizens. We simply cannot succeed without well-maintained roads and bridges, emergency services, and a strong military. I believe we also have an obligation to care for our elderly and disabled.
But for far too long, our leaders in Washington have looked to the American taxpayer to continue feeding our bloated government programs.
Here in Maine, we drastically reduced the highest marginal tax rate, over a series of cuts, from 8.5 to 7.15 percent, and it is important that we continue this trend with additional reductions and reforms to help improve Maine’s economy.
Those who opposed these cuts warned of Doomsday scenarios for Maine’s economy, but just the opposite has happened. Maine ended the last fiscal year with a $111 million surplus. The state’s unemployment rate is lower than it has been in decades. Businesses are struggling to find enough workers to keep pace with their growth.
There is no reason that this cannot and should not happen at the national level. If we are to remain a competitive country, the time for comprehensive tax reform is now.
(Sen. Dana Dow, R-Waldoboro, represents all of Lincoln County except Dresden, plus Washington and Windsor. He is the Senate chair of the Taxation Committee and also sits on the Insurance and Financial Services Committee.)