Recent US Census reports have begun to trickle in providing much fodder for discussion.† Headlines tell us our taxes are too high.† In fact, they say our state tax burden is eighth in the nation and that the local tax burden is second.† When combined, we have the most onerous state and local taxes in the nation.† If that is not enough, the Census also reports that our average income of $36,400 is the lowest in New England, five thousand dollars below the national average. †Our kids are leaving for greener pastures; in fact, 22 percent of people ages 20-34 have left Maine since 1990, and in mill towns reliant on single industries the number is even higher.† In Millinocket 54.21 percent of 20-34 year olds left home and in Woodland the number is 38.93 percent.† This is exponentially higher than the national average of just 5.37 percent.† Moreover, we have the least number of degree-holding residents in New England with just 22.8 percent, twelve percentage points behind Massachusetts.† And although we have increased funding for K-12 education by some nineteen percent in the last four years, the disparity between state support for elementary schools in poorer communities and richer communities has increased.
Experts have offered several explanations for our high tax burden.† We live in a rural state and have high fixed costs distributed across a small and relatively poor population.† We need to build more than twice as many roads as New Hampshire and educate a similar population of students over a landmass that is larger than the rest of New England combined.† We have a lower-income base that makes our taxes greater as a percentage of income, and the Census Bureau failed to account for the $450 million in taxes we have cut over the last five years.† But, if youíre a low-income Mainer, struggling to make ends meet, these excuses, albeit accurate, provide little relief from the flood of bad news.
To improve Maineís economic picture, we must raise incomes by investing in the future of all of our citizens and transitioning Maine from an economy heavily reliant on agricultural and industrial interests to a more diverse economy that includes high-tech, service and financial sector jobs along with our traditional industries.† We have to stabilize and lower our taxes by spreading the burden fairly.† And, we have to lessen the disparity between the haves and have-nots in terms of school funding.†
Itís easy to say we need to spread the tax burden more evenly and lessen the pinch, but how do you do it while still investing in education?† If you read the census report carefully, it becomes apparent that local taxes are the strongest force in increasing our tax burden.† Local taxes rely heavily on the property tax, a holdover from the era of landed gentry and an exclusively agrarian economy.† In order to lower our taxes, we first must look at ways to reduce our reliance on the property tax.
This fall, two select committees of the Maine Legislature will begin looking at alternative ways to fund education.† First, the McGowan Commission will look at a plan used in Michigan, which lowered property taxes and produced more state investment in education by eliminating sales tax exemptions.† The second committee is looking at essential services in K-12 education.† The goal is to define for the state what is essential in K-12 education and then try to equitably fund all school districts in our state for these programs.†
Of course, the underlying problem contributing to the high tax burden is the relatively low level of income Mainers earn.† The most effective way to address this problem is through investment in higher education.† Individual earning capacity is directly linked to educational attainment.† The US Census Report shows that an individual with a bachelorís degree will earn on average, $21,000 more per year than a person with a high school degree: $1.6 million dollars more over the lifetime of that individual when adjusted for inflation.†
Maine people donít pursue higher education in Maine for a variety of reasons.† First and foremost, they cannot afford tuition.† Our community college system is much more expensive than the national average.† It costs over $2300 per year for tuition compared to the national average of $1500.† One solution would be to challenge private individuals and companies to meet the state halfway by creating challenge grants for financial aid.† For every one dollar a private individual invests in sending Maine kids to Maine schools, Maine should match that with an equal investment.†
The other part of our investment must be in our university system itself.† A first-rate university system is a critical tool for attracting new and emerging industries to Maine.† To do this we must endow professorships, improve our facilities and recruit nationally and internationally renowned talent.† Educating our workforce and improving our University system will serve as the driving force for economic development and will increase incomes and lower our reliance on high taxes.† Again, look at our neighbor New Hampshire, which just this year increased capital spending for its university system by one thousand percent!† New Hampshire correctly realizes what Maine must: a top-tier University system is critical to economic growth.
The US Census is a wonderful benchmark for Maine to begin planning in earnest.† We can no longer plan in two-year cycles.† We must set goals for where we need to be as a state before the next census and determine a way to get there.† I believe the most logical first steps toward lowering taxes and building prosperity include lowering property taxes by broadening our tax base and investing in higher education.