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Alex Hammer

Economic Road Map and Tax Reform
By Alex Hammer
Jan 21, 2006 - 6:35:00 PM

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Tax relief is a pressing concern to citizens of this state. Anybody paying attention to the feelings of Mainers who doesn’t know that just isn’t alive. Tax relief is also critically important to me. To make this happen in reality, one can make responsible reductions in spending and should when financial circumstances warrant. This must also always be paired, however, with ROI-sensitive investments that increase the size of the total pie in Maine and serve to increase our competitiveness in the global marketplace (seeking to maintain our position is too low an aspiration because what if we fall short of that goal, what happens then?). This is accomplished through economic growth, creating good jobs in sustainable and leading industries that better leverage our strengths in Maine and provide livable and good wages for Maine citizens.

I am fiscally conservative (and socially moderate) and believe in, in the most general terms, a pay as you go philosophy in which you do not spend what you cannot truly afford. Although belt-tightening is certainly required as a responsible measure when financial circumstances dictate, and I would not hesitate at all to do so when needed, this should be fair, humane, and never “penny wise and pound foolish”. Curtailing spending all by itself also does not and cannot bring true lasting prosperity. If it did we could just keep cutting and cutting until we were down to zero, shut down the entire government at all levels in the state and we’d be rich (some of you may perhaps feel that I am on to something there!).

While remaining disciplined in our spending we must at the same time be creating a viable economic infrastructure and system in which Mainers of today and their children (and also generations to come) will have the opportunities to sustain ourselves (and themselves) and prosper. There is so much competition in the world that if Maine remains divided within itself – locked in partisanship resulting from (among other things) lack of leadership - I genuinely worry that our long-term economic sustainability will become seriously impacted and jeopardized.

With that as a backdrop I present comprehensive, bi-partisan tax reform (some reasons for use of this terminology is below) encompassing six essential areas.

  1. Reduction or elimination of business taxes.
  2. Sales tax rate lowered but broadened.
  3. State Income tax rates maintained at current levels but increased for 1% of wealthiest Mainers.
  4. Property Tax Reform – Full implementation of mandated State contribution to education, with teeth to insure use as intended.
  5. In regard to surpluses, the first priority is debt reduction, the second priority is direct tax relief via reimbursements to taxpayers and rainy day fund, and the least emphasis and lowest priority is any new spending. These areas can co-exist but will differ in emphasis based upon their respective priority ranking.
  6. Towns and municipalities earning increased local options and incentives by demonstrating cost efficiencies and meeting performance metrics, with penalties for poor performance among those most lagging.. This involves also relative gains and losses (e.g. in percentage terms) rather than just absolute ones, so one is competing with oneself in large measure rather than just against others.

If you read my 1/10/06 Magic City Morning Star column entitled “This Great State”, you already know that I favor fundamental change over trimming around the edges. Actually, I advocate whatever I believe after much study and collaboration is required to most successfully meet or address a situation. As Maine’s current challenges I believe require more than trimming or nibbling around the edges in order to be successfully met, then that is what I recommend.

In regard to the tax reform structure listed above, the specific numbers that would be used would, in the aggregate, be analyzed to be initially tax-neutral, although the foundational principles easily lend themselves to tax relief (which, as stated above, is a critical concern).

This system is comprehensive as it recognizes the ecosystem of taxation in which areas (and factors outside of taxes) effect other areas. As a result of this, anyone that really wants to make a meaningful impact on taxation needs to look at the entire system at once, as well as each of its parts, to understand total and consequential effects.

This system is bi-partisan in the sense that there are elements for both ends (and the middle) to like, and thus hence also to dislike. This is not a system that is attempting to be all things to all people. I believe such systems generally frustrate many or all and do not come close to building levels of enthusiastic support which are needed for such endeavors to succeed. Rather, the proposed system is an attempt at balance between competing interests that best positions Maine as a whole in the direction of its economic vitality and goals (we’ll be examining each area shortly).

In addition to tax revenues this structure also attends to tax stability (avoiding volatile tax revenue declines especially) and tax fairness. These are both critical issues that are too often ignored with an up and down only focus on taxation.

What follows is a thumbnail comment section on each of the tax reform areas above. Of course, we’ll need to explain and have continued dialogue throughout the course of this campaign.

Business Taxes

Many have assailed the unfriendly business tax climate in Maine, such as has been painfully reported in regard to state business rankings. Business tax revenues make up a modest amount of the total tax revenues and can be lessened at a minimum.

Sales Tax

Overdependence on sales taxes, especially when the base of sales tax revenues is limited in scope, can result in downward revenue spirals in a weakened economy, in which big-ticket purchases, a significant component of such revenues, are deferred.

State Income Tax

This is a tough one. Of course I see that. A tax increase of any kind is considered politically unwise by many. I abhor tax increases myself.

The first point, while obvious, but important to keep in mind, is that this is a tax increase but an increase for only 1% of the population and has no individual income tax effect on the other 99% of the Maine population.

Within an entire proposed system that begins revenue-neutral and can quickly be utilized for meaningful and significant tax relief, is there not room for a single contrary aspect? An important consideration is that we need to be realistic. We have commitments and/or strong values from everything to unfunded debt liabilities, to healthcare, to education and transportation needs etc., even to sustain at what some would describe at critical sustenance levels.

In addition, I am very open to reducing income tax rates overall in the future when economic circumstances warrant this action.

A few more important points while attempting to remain relatively brief. I am aware of criticisms such that Maine already has a too high upper income tax rate, that it might serve to drive wealth out of Maine, and some that would even claim that the terming of “wealthiest Mainers” might in itself be an oxymoron. First of all, the typical business owner in Maine and their employees are not going to fall within this framework. Second, I want to make sure that that those that are profiting the most in Maine, in whatever ways they are doing so, bear at least some responsibility in regard to this financial gain, and are not out to exploit or take advantage in any way. Maine is a tremendous state and we must never be exploited. Those that gain the very most should do – not to create a burden – a little more than others.  And just for the record I am glad that in America people can and do make oodles of money. This can be a reward for their productive risks and hard work undertaken, and serves as a powerful incentive for themselves and others that immensely benefits this country.

In addition, Maine’s highest income tax rate begins at a relatively modest level of income, lumping many groups of individuals with quite varying means in the same rate bracket.

Property Tax

It concerns me greatly that longstanding Mainers can through increased property values be terribly burdened and face pressures affording their own homes. Being “house rich and cash poor” is detrimental in regard to the strains that it puts on communities, individuals and families. Mandated state contribution levels to education must have teeth so that well-intended initiatives cannot be circumvented. The money must go for the education for which it is intended. Period.

(A lot more can be said about property taxes, as is true for the other areas, and I have many additional thoughts and ideas).

Surpluses

It’s the citizen’s money. It is true, I believe, that it is amazing how easy it can apparently become for politicians to forget this (please vote me out too if I ever forget). What happens to you on an individual level when you are too much in debt? Think about it that way. With all the problems that it can create for you as an individual and as a family, why would we want to extend that to the state level? Isn’t that insane? And don’t tell me that we’re not so bad compared to other states. Yes, I do favor ROI (return on investment)–sensitive investments that do create real (as opposed to hypothesized) economic growth, but copying irresponsible behavior of others doesn’t make it helpful or right. There are many ways in which a “race to the bottom” phenomenon can be expressed.

State and Local Interests

Why can’t we all just get along (not that we don’t cooperate in significant respects already)? Maybe it’s just human nature that it is easier overall to be focused on individual versus collective concerns. Maybe at times frankly we don’t care what (or how) the other guy or gal is doing (not out of indifference but we’re busy), or we don’t trust that by looking out for their interests that they will look out for us. Maybe we have more power and can do as we please, or maybe we are on the receiving end of this dynamic and feel that we have no recourse.

Maine faces extreme external competitive market pressures from outside the state in the global economy that the world has become. Isolationism is not the answer, being able to compete is, for this same global competition exists in Maine as it does outside of it, and where could we possibly hope to hide to avoid this?

When we don’t cooperate we are more vulnerable to these outside pressures. Maine can succeed or it may become an also-ran. Of course that may sound harsh and we may wind up somewhere in the middle, but I do see the stakes as that high. That is why I feel comfortable and am very much in support of both fairly strong incentives and disincentives for local towns and municipalities related to appropriate performance metrics and cost efficiencies. Those rewards are financial but also greater local authority and control. Those that demonstrate that they can govern effectively and efficiently should be allowed to govern with increased options. And we are not insensitive to Maine’s traditions. That is what makes us want to live here and is attractive to others. So that is part of the equation as well, and very important.

In closing I would like to say that it is an honor to be in this race for Governor. Win or lose this has been a burning life goal for me and the experience has been a very positive one. Without becoming too philosophical, I believe that things happen as they should, and at the proper time. I feel ready to lead this great state, I really do, but I’ve been happy doing other things as well so we’ll do our best and continue to see how things go.

Thank you very much.


Alex Hammer is an Independent Candidate for Governor residing in Bangor. The campaign’s website, still in largely skeleton form until an anticipated March general launch, is www.Hammer2006.com.


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