While Democrats and Republicans have settled the fascinating free-for-all in the gubernatorial primary race, one of the equally interesting stories of last Tuesday's election was the message sent from voters about taxes and spending. They didn't like this tax reform and they were ready to keep spending. How is that possible?
Six out of ten of the 307,077 votes tallied supported the repeal of the Legislature's tax reform. At the time the law was passed, 55% of state legislators favored the reform. It lowered the income tax, extended the sales tax to 102 new categories of services and products and changed how we calculate itemized deductions. It was complicated and it did nothing to control spending.
According to the roll call vote on LD 1088, original passage of the reform split along party lines. With the exception of one Republican, Senator Peter Mills, the GOP said "no" to tax reform. Democratic State Representatives Andrea Boland, Herbert Clark, Peggy Pendleton, Michael Theriault, Charles Shaw and Michael Willette joined the GOP block in opposing the change. The rest of their Democratic colleagues pushed through the most bold tax reform in the last 40 years.
By repealing the law, Maine will retain its status of having one of the highest personal income tax rates in the nation. It means that for anyone earning more than $20,000, they will continue paying 8.5% for income taxes from their weekly paycheck.
It also means the Legislature will continue to struggle with the wide swings in revenue that come with changes in the economy. When times are good and money pours into the state's tax coffers, a majority of the Legislature tends to spend every nickel by adding programs, hiring state employees and expanding their health and retirement benefits. When revenues drop, however, programs get cut while state employees and their benefits usually are protected. That's one reason why core operating costs remain high for state government.
Further down the ballot, bond issues for alternative energy, transportation and water quality passed comfortably. The fourth bond issue, an economic development bond, slipped through with 51% in favor. No matter the margins, a majority of voters favored spending money for projects they perceived as valuable. Perhaps it is because the bond package had broad bi-partisan support from two-thirds of the Legislature.
However, what if the ballot questions for bonds were worded like this: "Do you want to sign a loan for $108 million dollars and pay an additional $26 million for interest on the loan?" Then if we put the borrowing in context with this footnote, "And oh, by the way, there's a billion dollar hole in the upcoming budget and we have an unfunded $3 billion liability for the state retirement system." then voters' heads probably would snap up and pay closer attention.
Another explanation of why we pass bonds is that many come with matching funds from the federal government that now has $62 trillion in accumulated debt. Hey, it's someone's else's money so a little pump-priming from the state's account seems like a good investment. Right? If you are going to dig a hole, why not get some help and go a little deeper?
In very pragmatic terms, though, most of what we agree to fund with bonds are necessities such as safe drinking water, good roads and energy efficient buildings. We also throw the dice occasionally and pump money into the game of economic development. The tragedy is that, as voters, we enter into these loan agreements with very little context about our overall costs and obligations. Instead, we rely on our elected officials to do their homework and to present us with their recommendations. That is why it is so important to elect people who understand the state's finances and are in touch with the challenges of our household budgets.
That brings us back to Tuesday's primary election. Based on the results, what should voters be asking the candidates? If the explanation offered above makes sense, the prudent voter should see how candidates feel about the stubborn facts of the Maine economy. They should ask about the state's growing liabilities. Also they should look for candid answers about their positions. This should not be a year in which being evasive is rewarded.
Finally, voters should encourage all candidates to tackle tax reform once again and include language that places a firm lid on state spending. A tax code that is simple and that includes reasonable discipline on state expenditures will not only improve their election prospects but it would be good for what ails us. Put your candidates on the spot and see what they have to say. Now, what do you think and what are you going to do about it?
