A tax conformity bill should be some of the Legislature’s most boring work, up there with consent calendars and quorum calls.
But lawmakers should not be lulled to sleep this year when they consider bringing the state tax code up to date with changes made in Washington.
That’s because Congress did much more than tweak the tax code last year, distributing $1.5 trillion in borrowed money to corporations and wealthy individuals. And Gov. LePage is using that federal action as an occasion to propose a major tax overhaul of his own, handing out tax cuts worth $88 million in the current budget and blowing a $115 million hole in the next one.
When the Taxation Committee meets Thursday for a public hearing on the bill, its members should remember that tax conformity is supposed to be boring. This is not the time to rewrite the tax code, especially not in a way that favors the same people who are getting the most benefit from the tax breaks that Congress passed last year.
The most expensive part of LePage’s package is a revved-up depreciation schedule for businesses that would cost the state $55 million in the current budget, according to an analysis by the Maine Center for Economic Policy.
This is a tax break designed to promote growth by speeding up the schedule under which companies write off their investments. But companies can get tax relief for buying new equipment that they would have bought without the state’s help. Stockholders of highly profitable businesses would be able to pocket a reward for planned investments, while the rest of Maine taxpayers have to make up the difference in the state budget.
And national businesses that have a presence in Maine could get a partial tax break for plant and equipment improvements made in another state, even though Maine would see none of the new jobs or other economic benefits.
LePage also proposes tax breaks that help the state’s wealthiest residents. For instance, he backs doubling the amount of tax-free inheritance from $11.2 million to $22 million. There are only about 20 Maine families that pay any estate tax at the current level, and giving them this break would cost the state an estimated $4.5 million.
And even tax relief that sounds as if it is aimed at middle-income families would give the wealthiest families even more tax relief than they have gotten elsewhere. For instance, a 0 percent tax bracket for income below $4,500 for single filers means some people would owe no income tax at all. But the same exclusion would be extended to the first $4,500 that every taxpayer reports, cutting the tax bill for the rich as well as the poor. A proposed $500 child credit is not refundable, so it would help parents with higher tax liability (because they have higher incomes) more than it would help those who are struggling.
Midway through a two-year budget and only a month away from the Legislature’s official adjournment date is no time to start work on a bill this complicated and far-reaching. The next governor and Legislature will be sworn in next January, in time to make any changes Maine people need before filing their 2018 taxes.
In the meantime, Maine lawmakers have enough to do without getting so excited about tax conformity.
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