Minutes of the Advisory Committee on Tax Reform Meeting
Gov. Kenneth M. Curtis highlighted some issues of concern:
Held on July 22, 2002
- Property taxes are the main problem – biggest threat to the state government
- The “welfare of the state is education” – cannot weaken one of the most important functions of government
- A strong foundation must be built for the next Governor
- Referendum process – need a major education process to educate the public. If the public is educated, it will be easier for them to accept the tough decisions.
Mr. Anthony Neves added some key figures to the discussion:
- Maine has a volatile tax system
- The current downturn in state revenues is due, in part, to an economic forecast that projected wages would rise 7%, while personal income would grow by 5%.
- The highest income tax rates kick in for a single person at $16,500 -- $33,000 per couple
- State taxes account for $4 billion of revenues per biennium, and $1.5 billion is derived from property taxes.
- The culture has changed: sales tax equals 20% -- declining percent of state and local taxes
- Sales tax – many exemptions, narrow base: remote sales hurt tax base
- Income tax side: unemployment is still around 4%; withholdings are surprisingly up in July after being down in June
- There must be an alignment of the expenditure side and the revenue side
- Coming together of two different cultures:
- Conservative and traditional
- Spending for priorities – education, health care, transportation, etc.
The audience then introduced themselves to the panel. After the introductions, the guidelines for the advisory committee on tax reform handout was discussed, namely the sections labeled “duties” and “questions and issues to be addressed by the Advisory Committee”. Suggestions for changes or additions were discussed (numbers in parentheses refer to the corresponding number in “Questions and Issues”):
The Honorable Daniel Wathen:
- Another principle that needs to be discussed is competitiveness (2)
- Add alignment to revenue stability and predictability (2A)
- Strategies for lowering taxes or providing individual tax relief – improved mechanism to respond to needs of some, while most do not need it – targeted tax relief
Ms. Eleanor Baker:
- Non-Mainers want us to stay the way we are. They need to share the costs in Maine’s operations and sources.
Mr. George Campbell:
- Should pertain to property tax – should be general (4)
- Tax exemptions and exclusions should include property taxes and others (4) – Justice Wathen agrees
- Transportation – needs input from this sector. What effect does transportation have on costs, revenues, etc.
- Amend #3 to read, “How does impact affect transportation”
- How should we look at Competitiveness? Just look at the tax burden?
- Stressed that competitiveness cannot be ignored, and it always needs to be kept in mind.
- Should all businesses be taxed the same (7) – to what extent do you have more discretion? Should an S-Corp be taxed the same as a C-Corp?
- Reiterated the first question “What should be the goal of structural tax reform?”
Speaker Michael Saxl voiced his opinion:
- There should be a three-fold tax system:
- Stability – Sustain what people want (quality education, protect the most vulnerable sources, protect what Maine’s businesses currently enjoy). Stabilize tax revenues (Stabilization fund)
- Tax Equity – Fairness and progressive. Maine’s income tax is too steeply progressive. Maine almost has a flat percent of total income equal to income tax.
- Long-term progress – We must look at the long-term effect of lowering the tax burden. What will be the effect on the economy in five, ten years?
Mr. George Campbell:
- Amendment to the goals – sustain educational spending.
- Need to look at the number of county government municipalities and the number of school systems.
- Remove destabilizing impact on the state government and the economy
- There is ambiguity to education in the Constitution and in law – education is the responsibility of towns, state can help out. Who should be financially responsible? Who should be held accountable for the outcome?
- In reply to: Court decrees have impacted how the states fund education, including Maine
- Must look at the federal role in funding, especially over time (special education, older population, federal funding)
- The demographics of Maine are changing, and how does this relate to the federal funds that we receive?
The floor was then opened up to any discussions, thoughts, or questions.
Justice Wathen suggested that they be able to listen to any proposal presented by any person or organization.
Anthony Neves suggested a Convergence Day, gathering all the interested groups.
Governor Curtis said that one goal of tax reform is legislation to be either approved by the legislature or the public.
Michael Saxl, George Campbell, and Ted Potter will draft an agenda by this Friday, July 26, and it will be sent out to all members and participants.
The meeting schedule was determined and will be sent out in full, accompanying the agenda. The proposed meeting time will be Friday mornings from 9:00 to 12:00 starting August 9, 2002, and will be held twice a month.