Half of Fiscal Responsibility is About Revenues

May 21, 2012 by

Maine’s 125th Legislature and the LePage administration have talked a lot about fiscal responsibility, but have their actions supported their rhetoric? House Speaker Robert Nutting called the Fiscal Year 2013 budget “an enormous step toward the goal of getting Maine’s fiscal house in order.” Governor LePage’s premature victory lap has a twelve-bullet section entitled “Putting Maine Back on a Track to Financial Stability.”

Fiscal responsibility is as much about revenues as it is about spending, and the 125th legislature and the Governor have hurt our fiscal situation by undermining the revenue side of the state’s balance sheet.

LePage’s own Commissioner of the Department of Administrative and Financial Services, Sawin Millett, understands this simple arithmetic. Speaking recently to the Joint Committee on Appropriations and Financial Affairs about the unpaid-for tax cuts in LD 849 Millett said:

“That’s what I hear, every time I go to meet with the bond rating agencies, so I think it’s important to keep the two sides of the equation always in balance, always in focus. We try to do that in this committee, and my questions and answers to you have always been with that in mind, that when you look downstream, and you take a long term view, that you try not to make one side of the equation get out of sync with the other.”

Despite the Commissioner’s concerns, LD 849 passed the legislature. The very next day, Moody’s Investors Service downgraded the outlook on Maine’s credit rating from stable to negative. While not specifically citing LD 849 in their report, Moody’s did state concerns about the imbalances in Maine’s fiscal equation:

“The negative outlook reflects Maine’s recurring challenges on the spending side of its budget, primarily in the Department of Health and Human Services (DHHS) which includes Medicaid; minimal budget stabilization fund (BSF) balances and chronically negative GAAP-basis combined available reserves, a large portion of which is related to Medicaid reimbursements due to hospitals; and a weak General Fund liquidity position reflecting the lack of reserves.”

LD 849 was only the latest of several tax cuts passed by the 125th. Tax cuts mean less revenue. In the case of LD 849, the lost revenue is about $600 million per year, once the tax cuts are fully realized. Contrary to proponents of discredited supply-side economics, tax cuts don’t “pay for themselves” by stimulating the economy and increasing total tax revenue. This is especially true in a small, isolated state like Maine where spending on imported essentials like gasoline, heating oil, and food leaves the state immediately with no “dynamic effect” on the economy.

Governor LePage and his allies in the 125th Legislature preach fiscal responsibility but they practice an ideological agenda of reckless tax cuts that threatens Maine’s credit rating and our ability to invest in a strong economy and future prosperity.

2 Responses to “Half of Fiscal Responsibility is About Revenues”
  1. Tom Czyz says:

    The divide in America is not between political parties and their ideologies, between religious beliefs, between rich and poor, or between value systems; it is between the corporate state and the citizen.

    Paul LePage knows what he wants; a corporate state. Paul LePage, his staff, and his supporters clearly march to the following orders; establish optimal conditions for private firms to enter Maine so that they may profit without interference. The marching orders follow a simple set of principles.

    • Eliminate outside influence on compensation and benefits.
    • Consolidate control of operating expenses.
    • Remove controls (regulations) impacting freedom of action.
    • Establish barriers that prevent challenges to the corporate state’s control.

    The marching orders are clear, concise; the guidelines are flexible, yet focused. Easily understood and executed in our world of sound bites and generalities; critical thinking is not required.

    Removal of collective bargaining rights for Child Care Providers was a symbolic message to corporate entities “Maine is Open for Business, no wage or benefit concerns here” and to the citizens of Maine “your rights to fair compensation and benefits are controlled by the corporate state”.

    The attempt to repeal the Maine ban of BPA, the harmful chemical found in plastic bottles, was another symbolic message to corporate entities “Maine is open for business, put what you want into your products” and to the citizens of Maine “don’t waste your time challenging the corporate state about health concerns because Paul LePage and his administration doesn’t care about your health”.

    Educational Commissioner Steve Bowen’s dismissal of a citizen’s group shortly after Paul LePage’s comment that “all middle-management are corrupt”, was a message to corporate entities “Maine is open for business; if someone gets in your way, they’re gone”. Steve Bowen indicating he would develop the educational plan internally by the end of the year said to Maine citizens “you will not have input into your child’s education except through support of for-profit charter or religious schools”.

    None of this is difficult to accomplish if you have the legislative votes and pre-written legislation (ALEC); critical thinking is not required.

    Can it be more insidious? State revenue from within the state comes from state income, sales, and real estate taxes. Reducing the state income tax more than likely places additional burden on sales and real estate taxes; and that is Paul LePage’s intent. Those who can least afford real estate tax increases are the middle-class and working-class. Mainers will have to work harder and longer, for wages and benefits more highly controlled by corporate entities.

    The message to corporate entities is “Maine is open for business, pay the citizens what you want, no one will get in your way because they won’t have the time or money to object” and to the citizens of Maine “go to Wal-Mart, treat yourself to a six-pack of PBR, sit on the porch and count your blessings”.

    Elimination of the middle-class and working-class, is it social Darwinism or social genocide? Paul LePage doesn’t care what you call his actions, all he cares about is being CEO of a corporate state, and he is well on his way. Unless…(Thoughts?)

  2. Last session the Maine State legislature passed  An Act To Provide Greater Access to Capital for Certain Businesses Through Advance Payment of Employment Tax Increment Financing Benefits.

    Employment tax Increment financing means that the workers in the legislature’s “targeted sector ” (above average incomes & other special interest qualifications) combined with all of those taxable in the legislature’s UN-targeted sector (meaning taxed but not represented) pay up to 80% of payroll taxes owed by the owners of the means of production- A tax credit which the owners of the means of production procure in exchange for delivering revenue to the corprorate state in the form of income-taxable above average income workers.

    Giving an advance on employment tax increment financing sounds like it is an advance on income tax credit for employees not yet hired:

    Read the words of the words of the statute:

    Sec. 5. 36 MRSA §6754, sub§4
    is enacted to read:4.Advance payment permitted. The commissioner, under extraordinary circumstances, may provide an advance payment in anticipation of reimbursement under subsection 1 to a qualified business using a net present value calculation, determined by the commissioner and the State Tax Assessor, based on an estimate of future employment tax increment financing benefits. The payment must be made in the form of a loan from the Maine Rural Development Authority pursuant to applicable requirements in Title 5,chapter 383, subchapter 9. The commissioner and the State Tax Assessor shall establish procedures for determining any variations between advance payments and final benefits due and for repayment of loans from the Maine Rural Development Authority under this subsection

    That means – of the group that pays the bulk of the payroll taxes due by the owners of the means of production- some of them – targeted sector employees- do not yet exist and no revenue can be collected from non- existent workers.

    So is it a surprise that the legislature also passed a temporary sales tax increase on the main stay of the legislature’s UN-targeted sector- retailers – who comprise most of Main Street? Retailers are excluded from services and benefits doled out by the legislature’s DECD corporation- other wise known as the Department of Economic and Community Development- and if you read the charter for the DECD corporation, it is clear that the “community” served by this corporate instrumentality of the state is a global community- NOT a local one!

    Tom Czyz is correct that Maine is now a corporate state but the legislature had to trample on the Maine constitution to fulfill its quest for power and gold in their new self authorized roles as CEO’s of the corporate state because the Maine constitution clearly separates corporation & state in Article IV Part Third Section 14.

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