Guidelines for Structural Tax Reform
As Amended By the Speakerís Advisory Committee on Tax Reform
July 22, 2002
[All changes to the questions and issues are shown in bold or in italics]
Questions and Issues to be Addressed by the Advisory Committee
1. What should be the goal of structural tax reform?
Speaker Michael V. Saxl proposed the following goals for structural tax reform:
A reformed tax system should sustain what the people want, including:
- Quality education for K-12 students,
- A quality higher education system,
- Protection of Maineís most vulnerable population
- Protection of the benefits currently enjoyed by Maineís businesses,
- Revenue stability
A reformed tax system should meet the standards of equity, fairness, and progressivity.
The current income tax structure is too steeply progressive. Maineís income tax structure today takes almost the same percentage of total income from each group within different income ranges.
A reformed tax structure should lower the tax burden over the long run within 5 to 10 years.
George Campbell agreed with the proposed goals. He emphasized the need to reduce expenditures by increasing efficiency by such means as reducing the number of school systems, reviewing the services provided by each municipality, and determining how governmental services at all levels can be more efficiently provided.
George Campbell also proposed a goal to project the relationship between changing state demographics and federal funding. It is necessary to look at the role of federal funding and articulate goals or priorities for this funding, such as special education and assistance to the elderly.
Justice Wathen emphasized the goal of removing the destabilizing impact of revenue volatility on state government and the economy.
Justice Wathen also stressed the need to clarify funding of education. Currently, the Maine Constitution prescribes this responsibility to local governments, but the State also funds education. A goal of structural reform should be to remove the ambiguities relating to the responsibility for educational funding and accountability for educational outcomes.
2. What guiding principles should be used in developing structural tax reform? The Advisory Committee shall consider, at a minimum, the following principles and issues:
- Revenue stability, predictability (volatility), and Alignment,
- Equity, Fairness, and Progressivity,
- Strategies for lowering taxes or providing targeted or individual tax relief,
- Efficiency in revenue collections and expenditures,
- The proper mix or balance of broad-based taxes
3. Adequacy of revenues to meet government services and obligations. How can State and local tax revenues be best assured to meet the needs and wants of Maine citizens, including transportation needs and programs, over the long-term? How can upturns and downturns in revenues be avoided as economic conditions change?
4. To what extent should current tax exemptions and exclusions on the State and local levels be maintained or repealed?
5. The extent to which intergovernmental collaboration, to include regionalization of services and administration, can reduce the tax burden on Maine citizens.
6. Incentives for investment in the Maine economy. Are taxes the most important of the incentives or do other factors play an equal or greater role, such as health care, utility, transportation, and labor costs?
7. To what extent should businesses and households with the same income be treated equitably with respect to taxation?
- Should businesses be taxed at the same income tax rates as individuals?
- Should all businesses be subject to the same tax? [For example, currently, banks, insurance companies, and utilities are subject to different taxes with different tax rates]
8. To what extent should the cost of K-12 education be funded from the property tax?
9. Any other area deemed a priority by a consensus of the Advisory Committee.