By Rep. L. Gary Knight
and Sen. David Trahan
Tax policy should reflect shared community values and encourage economic activity that benefits us all. The $203 Million tax-cut package unveiled by Maine Republicans last week better reflects the priorities of average Maine citizens seeking a better life for themselves, their families and future generations.
It does so by moving us closer to three long-held goals of an ideal system of taxation. Summarized in four words, these goals are: fairness, targeted investment and simplicity. Here are some of the highlights of our tax plan and how they address these goals:
The GOP Tax Committee Plan provides a 100% income tax cut to 70,000 low-income tax filers who currently pay some state income tax, but would have $0 income tax liability beginning in 2012.
It allows a family of four to earn up to $35,750 a year before paying any state income taxes (current law allows only $21,400). This is a whopping 67% increase in tax-free livable income.
In 2013, it will give a family of four earning $50,000 a year a tax cut of $302. This is a 24.6% reduction in their state income taxes.
Because Maine small businesses create the vast majority of all new jobs, our plan supports small-business investments by removing the income tax penalty imposed by the lack of conformity with federal Section 179 expensing provisions.
We propose to eliminate the 7% meals and lodging tax on retirement facilities and the sales tax on fuel for all commercial fishing vessels in the Gulf of Maine. There is also a credit for public fishery infrastructure for both salt and fresh water.
Our plan also represents an important step toward stopping the flight of capital out of Maine through a modest reduction of the top tax rate from 8.5% to 7.95% without proposing to expand the sales tax on struggling taxpayers.
The plan simplifies Maine’s complicated income tax system by reducing the number of tax brackets from four to three. For the 2012 tax year, the rates would be 0%, 6.5% and 8.5%. In 2013 the rates would be set at 0%, 6.5% and 7.95%.
It also eliminates the Alternative Minimum Tax and brings it into conformity with the federal personal exemption amount and standard deduction for joint filers.
We believe that leaving more hard-earned money in the hands of Maine citizens will generate more economic activity and jobs. The government should avoid the “Nanny Style” practice of taking money away from people, then making select groups of people apply to the government to get some of it back.
People can, and do, make responsible choices every day on how to spend their hard-earned money. Our plan eliminates the need for people to have to apply for a low-income tax credit by adopting a zero-percent income tax rate on the first $10,350 of income.
Another notable feature of this package is that it creates a “Sales Tax Holiday” every year in October. Purchases up to $1,500 on that day would be exempt from Maine sales tax. This is of particular importance to border communities, which are often at a competitive disadvantage because of more favorable tax policies in New Hampshire.
The tax package recently passed by the Legislature’s Taxation Committee on a party-line vote is an important step in the right direction, and it represents a departure from how things have been done previously. We are pursuing a more taxpayer friendly approach that will create more jobs and, ultimately, more taxpayers.
It is another example of how Maine Republicans remain in tune with the voters who demanded change last fall and how we are acting on their concerns and desire for a better way of doing things.
These achievements in difficult economic times are notable for what they will accomplish. Our package is offered in the light of day with plenty of time for the public to weigh in on it, and the legislature to debate it. In the end, we believe it will ultimately take Maine closer to where we all want to go, more money in the pockets of taxpayers, greater economic activity, and more jobs!
State Rep. L. Gary Knight and State Sen. David Trahan are the chairs of the Taxation Committee in the 125th Maine State Legislature.
Knight is the State Representative for House District 81, which includes two counties and four towns. Leeds, Livermore and Livermore Falls are in Androscoggin County, and the town of Wayne is in Kennebec County.
Trahan represents Maine Senate District 20, which includes the Kennebec County town of Windsor, the Knox County communities of Friendship and Washington; and many Lincoln County communities.