Here’s a rule they don’t teach in economics classes:
It’s not just about lower taxes. It’s really about paying less in taxes than the competition.
Allow me to use myself as an example. Years ago, I developed a successful scheme to reduce my tax bill: I decided to make my living as freelance political columnist, thereby severely limiting my earnings. But even though my annual bills from the tax collectors in Augusta and Washington are for miniscule sums, I’m not satisfied. I can’t shake the uncomfortable feeling that other columnists are paying even less than I am.
I won’t be satisfied until I’m assured that Cynthia Dill of the Maine Sunday Telegram is facing a stiff surcharge every time she contradicts herself. The IRS should crack down on the Bangor Daily News’ Lance Dutson for willful impersonation of a reasonable person. The Forecaster’s Edgar Allen Beem and the Portland Press Herald’s Bill Nemitz have always favored tax hikes, so let’s grant their wishes.
I’m willing to pay my fair share, so long as “fair” is defined as “less than those guys.”
I readily confess that this attitude is self-serving and contrary to the principles of democratic government. In other words, it’s exactly like most tax policy.
Over the last few decades, the state has granted nonsensical tax breaks to all kinds of businesses. If you buy a yacht in Maine, but move it out of state within 30 days, it’s sales-tax-free. If you own a big shipyard, you can receive $2.85 million in tax credits from the state each year for doing nothing more than existing. Paying property taxes on business equipment? There’s a reimbursement for that.
According to Republican state Sen. Eric Brakey of Auburn (campaign slogan: Weird, But Not A Complete Loon), there are at least 47 of these credits or exemptions for corporations that cost the taxpayers around $225 million a year. Brakey told the Press Herald the idea behind these sweet deals was to improve the business climate.
“But I think that what happens, in essence, is the only people who really benefit from these carve-outs are the companies that are big enough to afford the lobbyists to get the carve-outs in the first place, and then the companies who can afford the legal teams to figure out how to use the carve-outs,” he said.
Brakey originally introduced a bill to do away with the entire lot them – he’s since scaled it back to remove only the largest and most abused ones – and use the savings to eliminate the corporate income tax. In other words, every corporate entity would pay lower taxes, not just a privileged few.
Naturally, the business community is opposed to that, because it would destroy the hierarchy that allows the favored few to avoid taxes, while their competition has to make up the difference.
Take, for example, the Maine New Markets Capital Investment program, a shell game that allowed out-of-state investors in the now-defunct Great Northern Paper mill in East Millinocket to qualify for $16 million in tax refunds for investments they never made. A recent study by the state Office of Program Evaluation and Government Accountability found that for every dollar in New Markets credits the state paid out, the net benefit to the local economy comes to 19 cents. Or how about the quarter-million dollars the state cheerfully refunds to moviemakers for producing films nobody ever watches – except their unfortunate friends and relatives. They could at least have given us free tickets.
Brakey’s bill is a tentative step in the direction of a simpler tax system stripped of undue advantages handed out for dubious reasons. His plan to end the corporate income tax is flawed by the fact that 70 percent of Maine businesses are so small they don’t pay it anyway, instead filing as part of their owners’ personal returns. So the Brakey measure would give the larger corporations a break – no income tax at all – that smaller companies couldn’t take advantage of. Instead of focusing on the corporate tax, perhaps the extra cash should be spread across the spectrum of taxpayers, reducing bills for everyone.
Except Dill, Dutson, Nemitz and Beem. Those suckers have to pay more than me.
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