Legislature Rejects Fiscally Irresponsible, Poorly Targeted Pension Tax Cut

April 11, 2012 by

Despite evidence that Maine’s employment picture remains bleak, state policymakers continue to pay little attention to steps that would boost the economy and create jobs.  After rushing forward on yet another budget-crippling tax cut earlier this week, this Legislature finally found a tax cut it could not embrace.  Word came late yesterday that the $40 million supplemental budget bill approved by the Appropriations Committee “set aside” the Governor’s proposed income tax cuts on pensions.

In testimony on March 22nd, MECEP Executive Director Garrett Martin opposed this tax cut, telling the Committee “To be blunt, this proposal is fiscally irresponsible and fails to deliver tax relief to those who need it most.  We must ask ourselves – who are the older Mainers most in need of tax relief?  More than likely it is not someone with a pension.  It is someone who lacks the retirement security to stop working.”

Martin reminded the Committee that Maine Revenue Services placed the annual price tag for this proposal at over $105 million when fully implemented in 2019. He added that the Governor had made no provision to pay for it, passing the buck for spending cuts or other revenue sources to future Governors and Legislatures.  He also told the legislators that this proposal would have dire consequences in the future when revenues would decrease while Maine’s population grows older and their demands for services like health care increase.

“This is a recipe for fiscal disorder,” he cautioned.

In an April 6th op ed column in the Portland Press Herald, Martin rejected the Governor’s argument that retirees flee Maine because of the state’s tax burden, noting that the data shows that  less than 1 percent of seniors moved from state to state after age 65 for any reason.

He also emphasized that like other LePage Administration tax cut proposals this one is “poorly targeted.”  It delivers most of its benefits to those least in need- 65% to the top 20% of taxpayers.  The bottom 20% will receive an average benefit of two cents per year, compared with an average of $438 for the top 1% percent.

“A much more fair and effective way to ease the burden on seniors would be to expand state Earned Income Tax Credit eligibility to working Mainers 65 and older and make the credit refundable for all who are eligible,” Martin added. “Restoring the property tax relief program to its full level for everyone and streamlining the enrollment process to encourage greater participation would also benefit Maine seniors who need it most.”

Regarding the real problems Maine faces, Martin asserted that “Investments in education, research and development and infrastructure would do far more to increase Maine’s long-term competitiveness, create jobs and grow Maine’s economy.”

Rejection of this proposal is a welcome victory but real progress toward effective economic policy is what Maine people truly need right now from their leaders in Augusta.

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