Rare is the day when a fiscal conservative agrees with a Democratic governor, but this is the day. Here is why. The governor proposed sending about 800,000 Mainers earning $75,000 or less a rebate check for $850. Four arguments support it, three oppose it, common sense says do it.

Gov. Mills delivers her State of the State address at the State House on Feb. 10. Mills’ budget proposal caps annual income eligibility at $75,000 a year for individuals and $150,000 a year for households, making about 800,000 Mainers eligible for a one-time $850 relief check. Ben McCanna/Staff Photographer

ABOUT THE AUTHOR

Robert Charles is a Leeds resident who grew up in Wayne; earned a graduate degree in economics at Oxford University; served as assistant secretary of state under Colin Powell, and was a domestic policy staffer in the Reagan and George H.W. Bush White Houses.

In favor, four arguments:

• Mainers are suffering – disproportionately – from higher energy costs and inflation. Unlike much of the country, New England is highly dependent on oil for heat. Sixty percent of Maine homes use heating oil to keep warm, while just 8 percent use natural gas.

In 2022, a typical 2,500-square-foot house uses roughly 880 gallons of oil in a year. Here is the kicker – the price of fuel oil has exploded. What was $2.30 a gallon in 2021 is $4.90 a gallon now. The average annual cost of heating by oil went from $2,024 to $4,312 in a year.

Putting causes aside, consider gas at the pump. Three-quarters of Mainers commute, even if just a short distance. COVID keeps many remote, but some jobs require being there. The cost of gas, like oil, has jumped. Gas today is $4 a gallon, diesel $5, and both are likely to climb.

Again, put causes aside. Some will note that the federal government has reduced fossil fuel production. Others note that Russian imports were cut to support sanctions. The main point: Maine consumers are feeling the pinch.

• Second argument favoring the rebate, another national trend: Inflation jumped 1.2 percent last month and is now at 8.5 percent. Causes vary, from federal spending to global instability. Those numbers are at a 40-year high, and the elevated costs hit us all, from gas and food to consumer durables. Wages lag, interest rates rise and the economy may slow. Relief is timely.

• Third, Maine is running a surplus – a function of post-COVID recovery in revenues and unspent federal COVID relief, much unspent nationally. Logic says: Get that money out to people.

• Finally, although other options exist, reality says this is a onetime event, not likely to become a sustained surplus, not driven by structural change, new employment, great jobs or less state spending. So, distribution now is fitting, returning money to those who paid the taxes.

Opposed, three arguments:

• First, a surplus in any year invites reexamination of the revenue-and-spending balance. If programs are properly funded without the surplus, income tax (or other taxes) could be cut. Government should leave as much with people as possible.

• Second, even if a permanent cut in income tax is not possible, the alternate might be a gas tax holiday, benefiting all commuters, regardless of income – at a time of high gas prices.

• Third, these monies could be applied in other ways, including debt reduction, targeted relief for small businesses (consistent with COVID relief aims), or backfilling a gas tax holiday, which reduces the state’s Highway Fund.

Answers are easy, if debatable. A look at the state’s tax code is always timely, as the revenue-spending balance shifts, regardless of surplus. A sustained surplus would warrant lower taxes.

A gas tax holiday is also a good idea, especially in view of how many Mainers commute and steep price increases. But that reduces (by perhaps $230 million, or one-fifth) resources needed for the Highway Fund and involves the loss of potential summer revenue from tourist purchases.

Finally, what better way to apply excess revenue than to give it back to the people who paid it in, as federal taxes? Might other income brackets and small businesses get cut in? Yes, but there are worse uses of a surplus than returning it to taxpayers, who then spend it and generate jobs.

Net-net, this is good problem to have in an age of bad problems. When handling a $2 billion budget for Secretary of State Colin Powell, as his assistant secretary of state, we cut waste, made spending accountable, managed each dollar as if our own. We never had a surplus, but if we had – it would have gone right to the taxpayers. The choice is sound, no matter who makes it.