Loss of income tax would reduce services and increase property tax

Former Governor LePage is running for governor and is again proposing to eliminate Maine’s income tax. His theory is that it will attract big business from other states. He claims on his website that our family incomes will increase accordingly because we will pay less tax overall. Is that realistic, or just an appeasement of staunch LePage/Trump supporters?

Will eliminating the income tax significantly increase household incomes for most Mainers? To assess, compare the financial situation of families in Maine to those in the eight states that currently do not have an income tax. These are Florida, Wyoming, South Dakota, Nevada, Texas, Alaska, Washington and Tennessee. From 2020 census data, analyzed by the Federal Reserve Bank of St. Louis, we learn that only residents of Washington and Alaska have significantly higher median household incomes. Household incomes in Maine far exceed those of households in Florida, Texas and Tennessee; and are about the same as households in the remaining three states. A significant increase seems unlikely.

Unless draconian cuts to state services are part of LePage’s plan to make up for the loss of the 43% of state budget revenue from income taxes, what are the likely sources of revenue that LePage and the legislature will consider increasing to balance the budget? How states without income tax fund utilities give us clues. Florida and Nevada rely primarily on sales taxes. Tennessee and South Dakota rely on a combination of high sales taxes and license fees. Texas, Wyoming and Washington rely on sales taxes and property taxes.

The most likely outcome of LePage’s plan to eliminate income tax will be a combination of severe utility cuts, increases in sales and excise taxes, and a significant reduction in the in K-12 education costs, thereby increasing municipal property taxes.

George Seel


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