Citing a 60% drop in individual health insurance rates, the Maine Heritage Policy Center (MHPC) declares victory on this law. The problem is that they’re not telling the whole story. They’ve cherry-picked data for one carrier, for one product, in one market, at one point in time.

It’s like saying you’re a straight A student because you got an A in gym without checking your grades in the rest of your classes.

For starters, the quality of the products MHPC compares are completely different – one covers maternity, the other doesn’t – and that’s just the tip of the iceberg. Even if the products were the same, the story differs depending on your comparison point.  For example, for the lower deductible version Maine Wire cites in its story, a 60 year old individual will see a 48% drop in rates. Yet, the high deductible plan offered by the same carrier indicates a 21% increase for a 60 year old.

The real impact of the health insurance law, P.L. 2011, Chapter 90 or PL 90, is much more complex. Critically important information is still unavailable and has yet to be fully sorted out. From the beginning, MECEP acknowledged that some people in the individual insurance market could see significant rate decreases. This is because PL 90 subsidizes the individual market to the tune of $22 million. Here’s a headline you’re unlikely to see on the Maine Wire: “Public Subsidies to Health Insurance Companies Reduce rates for Less than 3% of Maine People.” – But that’s an important part of the story.

Of course, the new health insurance law doesn’t just affect the individual market – the focal point of the Maine Wire story – it also has impacts on the small group market. Almost three times as many people receive their coverage through the small group market as an employee or owner of a small business compared to the individual market.

The results for the small group market are more troubling. Small businesses with older employees in more rural parts of the state have seen huge – as much as 70% – increases in their rates. PL 90 gave insurance companies more power to vary their rates for the small group market based on age and geography while providing no public subsidy. The result, there are some winners in the small group market but there are a lot of losers as well.

In a failed attempt to address this glaring flaw in the original law, Senator Jon Courtney introduced a bill this session to create a comparable subsidy for the small group market. But to achieve comparable results in the small group market was prohibitively expensive and legislators quickly abandoned the idea.

Today’s Maine Wire release is more about politics than policy. The bottom-line is that the Maine Wire jumped the gun in declaring victory and is cherry-picking information to spin a premature tale of success.

MECEP has always acknowledged that PL 90 would create winners and losers. We have consistently argued that PL 90 gives more power and profits to insurance companies and does little more than rearrange the deck chairs on a sinking ship. The ultimate problem is not one of insurance costs; its health care costs. Until we tackle that challenge and base our decisions on apples to apples comparisons, we will not achieve our goal of access to quality affordable health care for all Mainers.

The numbers tell a different story. From 1996-2010, Maine saw a net gain from New Hampshire of 1,787 tax families comprising $145 million in income according to IRS state-to-state migration data.  In addition, the average income of the tax families that moved from New Hampshire to Maine ($39,000) was higher than the average income of the tax families that moved from Maine to New Hampshire ($36,000).  Not only did Maine gain residents from New Hampshire, but the ones who moved here were better off on average than the ones who left.

It is true in a narrow sense that no-income tax states account for lost population in Maine. What’s glossed over is that only one state is overwhelmingly responsible for that loss. Florida, with its sandy beaches and mild winters, accounted for 90% of Maine’s net loss to no-income tax states from 1996-2010. Suggesting that the absence of an income tax is the reason for this migration is just plain wrong.  The next four states that have seen the largest influx of Mainers – North Carolina, Arizona, South Carolina, and Virginia – all have income taxes.  They also have mild climates, affordable housing, and other amenities that are particularly attractive to recent retirees.

There just isn’t much evidence out there to support the idea of tax flight. That’s because it’s a myth:

As we discussed in a major report last year, the vast majority of people live their whole lives in the state where they were born, and the main reasons people move from one state to another are job prospects, housing costs, family considerations, and climate. So, for instance, to draw any meaningful conclusions about our two newest states, you’d want to factor in that housing in Anchorage is a bargain compared to Honolulu.  Studies by economists and demographers that take into account the wide range of other factors show consistently that taxes have little if any impact on migration.

And it’s a myth that’s been debunked over, and over, and over.

Rather than build policies based on ideology, we should focus instead on the real reasons people move – jobs, affordable housing, family ties, climate, and quality of life. We should build on our existing assets and make the types of investments that will give Maine a competitive advantage in the areas that matter most to people.

Maine’s state and local tax system already favors the most fortunate. It takes a higher share of income from poor families than it does from middle class families, and it takes a higher share of income from middle-class families than it does from the wealthiest.

Our local property tax and state sales tax cost middle- and low-income families a higher percentage of their income than they do the wealthy. The state income tax is the only vehicle we have to level the playing field because the more money you make the higher percentage you pay. Rather than scrapping the income tax, we should be overhauling our entire state and local tax system to make it based more – not less – on ability to pay.

As usual, MHPC uses fabricated, misleading statistics and faith in discredited “trickle-down” economics to argue that eliminating the state income tax will somehow benefit families struggling to get by. Consider this egregious distortion:

If we reduced spending to the level it was the day Angus King became governor, we could completely eliminate the personal income tax…If we reduced government’s size to 1994 levels, we’d save $1.7 billion a year.

Maybe MHPC forgot to adjust for inflation, but more likely they are ignoring it and betting you won’t notice. In reality, a dollar today buys much less than a dollar did in 1994, so the loss of income tax revenue would cut essential public services much deeper than in MHPC’s false scenario described above. Eliminating the income tax will either shift the cost of public education and other services to municipalities and property tax payers or require devastating cuts to public schools and other services vital to creating jobs and building a strong economy.

That’s how radical MHPC’s proposal is, and it is radical by design, not by accident. The goal is not to encourage shared prosperity by relieving the tax burden on working families. The goal is to terminate programs and services that both strengthen the middle class and help Mainers who aren’t there yet get there, and to transfer more wealth to those who least need it at the expense of everyone else.

Maine needs a bond package this year. Not since 1962 has Maine gone an entire biennium without a bond package for capital investment in the infrastructure that supports our businesses, fuels economic growth, creates jobs, saves taxpayer’s money, and strengthens our economy.

Since 1996, the Maine Legislature has sent an average of $83 million per year in bond proposals to the Maine voters. Ninety-seven percent of these have been approved leveraging an average $135 million per year in additional matching funds. Voters understand that we must repair unsafe roads and bridges, enhance downtowns and job centers, and invest in technology that drives new business.  They also appreciate that these investments create jobs- an estimated 15.3 for every $1 million in infrastructure spending –at a time when 50,000 Mainers remain unemployed in the wake of the Great Recession.

Just as a prudent homeowner makes repairs when they are needed and when she can afford them, so should farsighted legislators.

Interest rates have never been lower, so if you take out a home equity loan now, you will pay less interest than if you wait. Plus you can get a tax rebate on new, energy-efficient windows.. If your roof leaks and your windows are drafty, you can’t afford not to make these repairs now.

The same is true of Maine state government. Interest rates are lower than ever.  And as MECEP Executive Director Garrett Martin explained in a recent (Lewiston) Sun Journal op ed,

“Maine has a strong record of fiscally responsible debt management.”

There is a backlog of road and bridge projects and other repairs that will only be more expensive next year. Federal funds will help stretch state dollars. Voters are sick of wear and tear on their cars from potholes and crumbling roads, deteriorating downtowns, and interminable waits for Internet downloads.

Maine citizens and businesses need safe roads and bridges, high-speed Internet, functional downtowns, and innovative research and development to prosper and create jobs. We cannot afford to wait another year.

We’ve come a long way since the first Earth Day was celebrated in 1970. Forty-two years ago, Maine’s rivers foamed with chemicals and raw sewage. Roadsides were littered. The air stank from burning garbage. Our state’s health has changed dramatically due to farsighted public policies like recycling, sewage management, and pollution control programs.

Today the problem is not so much that we pollute our lands, but that we are losing the very lands we fought so hard to clean up.

Maine’s farms particularly are in jeopardy.

Like most businesses, farmers face challenges. But Maine farmers also face the loss of the very land on which they depend. According to the Maine Department of Agriculture, Food, and Rural Resources, in the last 10 years, 160,000 acres of Maine’s best farmland was lost to house lots or nonfarming uses.  At this rate, Maine will have almost no productive farmland by the time our grandchildren look for their first jobs.

Farming is not only a way of life, it offers significant economic benefits to our state:

• Maine’s farms and food processors provide over 65,000 jobs and contribute $1.2 billion annually to Maine’s economy.

•  Organic farming leverages $91.6 million in economic impact into the state of Maine.

•  A $500,000 state investment to conserve 83-acre farm in Brunswick preserved 50 jobs and just over $1.1 million in earnings.

By keeping our farmland in cultivation, we will not only preserve our heritage, but also fuel our economy.

As we observe Earth Day 2012, we can all do our part to help sustain Maine’s farming traditions. We can:

• Support local farms and buy locally-produced food. Frequent your farmer’s markets, local food co-ops, and retail stores and restaurants that carry local food.

• Get involved with your town. Local governments can play a big role in supporting farming from tax policies to land use protections.  A new guide from the Maine Farmland Trust offers help.

• Support farmland conservation. Many local or regional land trusts need volunteers and money. State funds for land conservation have been depleted. Talk with your legislators and urge them to vote for new bond funds for the Land for Maine’s Future program.

Our consumer choices combined with supportive public policies will help sustain local agriculture in Maine.

Fierce debate over the finer points of how much money we pay in taxes and how that money gets spent is important. Through this debate and our political process we control our own destiny as a society.

In that spirit, in an upcoming fact sheet, MECEP will use data from Maine Revenue Services to show how, like most states, Maine has a regressive system of state and local taxes: low-income families in Maine actually pay more taxes per dollar of income than Maine’s top 1%.

I’d like to briefly call attention to the federal tax system. Although it remains just barely progressive- meaning after-tax income is only slightly more equally distributed than before-tax income- it has been steadily declining in progressivity over recent decades. We know this due to the meticulous research by Thomas Piketty and Emmanuel Saez who point to three dramatic changes in the federal tax system over the last 40 years:

1.  A decline the top marginal individual income tax rate from 91% to 35%.
2. A decline in corporate income taxes as a share of GDP from 3.5-4.0 percent in the early 1960s to less than 2 percent in the early 2000s.
3. An increase in payroll tax rates that pay for Social Security retirement benefits and Medicare.

Go read the whole thing. Then read the profile of Picketty and Saez in Tuesday’s New York Times.

But you wouldn’t know about any of this based on the anti-welfare rhetoric coming from the LePage Administration, which is using the budget problems caused by the recession to bash effective, important parts of our social safety net. Talking about current and future budget challenges without addressing the recession is honest-but-ignorant at best and cynical at worst.

As MECEP has discussed before, balancing budgets becomes very difficult during and in the aftermath of recessions due to pressure on both the income and expenditure sides of balance sheets. As job losses and the general slowdown in economic activity reduce revenues for state and local governments, they simultaneously increase demand for social support services that state and local governments provide. Newt Gingrich called President Obama the “food stamp president”, but the recent increase in the SNAP  caseload would’ve happened regardless of who’s in the White House. That’s because, by design, SNAP is responsive when it needs to be: in times of high unemployment and economic stagnation.

But we don’t have to go to Washington to find this sort of misleading rhetoric that tries to connect current budget problems to the use of social safety net programs. Here is a quote from Governor LePage in an article about the state’s supplemental budget in today’s Bangor Daily News:

I have major concerns about the overspending in the General Assistance welfare program. Spending in this welfare program has grown from nearly $7 million in 2008 to a projected $14.3 million in 2013…

The General Assistance program is the last line of defense for Maine families in financial crisis, and we have plenty of them in the wake of the Great Recession. We should expect to see an increase in the use of the General Assistance program because that’s what it’s there for.

Over the long run, our budget problems are all about the cost of health care and an aging demographic, but that is a discussion for another day. Right now, the current budget problems we have at the state level are on the revenue side, and they are due to the recession. They are not due to the social safety net working the way it’s designed to work, during the darkest economic days most of us have ever seen.

Editor’s note: Joel Johnson recently joined MECEP as a Policy Analyst. Since October, 2009, Joel has worked as an economist at the Maine State Planning Office where he served as project leader for a comprehensive annual report to the Legislature on state and local government finances and as the primary staff member for the state’s Consensus Economic Forecasting Commission.

In testimony on March 22^nd, 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 6^th 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.

In 2011, legislators bowed to Governor LePage’s wishes and for the first time in recent history did not send any bonds to voters for their consideration.  The chief argument was the erroneous assumption that Maine’s existing debt is unsustainable. In fact, Maine has a well-earned reputation for fiscally responsible debt management. As recently as spring 2011, Moody’s Investment Service, one of the nation’s most highly respected rating agencies, stated that “Maine continues its conservative approach to debt, with an aggressive payout structure and capacity to accommodate unforeseen borrowing needs.”

One need only drive Maine’s roads to see just how desperate the need is for funds to make long overdue repairs.  Maine’s crumbling bridges, outdated and over-capacity water and sewage systems, and critical gaps in broadband and other communications systems show the need for a long-range, comprehensive approach to infrastructure financing.  With interest rates near historic lows and the prospect for leveraging significant additional federal matching funds the time is ripe to move forward on a strong, balanced bond proposal.

In an op ed column in today’s (Lewiston) Sun Journal, MECEP Executive Director Garrett Martin makes the case that:

“Passing a healthy, responsible bonds package now will accelerate Maine’s economic recovery by creating thousands of much-needed jobs.  Low interest rates mean a good return on investment for taxpayers.  Weak labor and capital markets mean bonds are unlikely to ‘crowd out’ private investment.  At a more fundamental level, a smart bonds package is about making the public investments that Maine businesses need to be competitive.  Bad infrastructure is bad for business. World-class businesses need world-class communications and transportation infrastructure.”

One proposal that I’ve written about before is LD 849.  The Maine House is set to vote on an amended version of this bill tomorrow.  House Republican lawmakers who voted against this proposal before are likely feeling the heat from their colleagues in the Senate.  They deserve our support in standing up for fiscal responsibility.

The amended version of the bill which cleared the Senate on Friday is no improvement.  Over time, LD 849 will still eliminate $600 million from Maine’s General Fund in order to lower Maine’s income tax rate to 4%.  The top 1% of taxpayers will collect an average benefit of $21,638 while the bottom 20% will receive just $1 on average.  This is just one in a series of recent tax proposals that undermine the progressivity of Maine’s tax system, compromise future revenues, and benefits those who need it least.

Other troublesome proposals addressed at today’s briefing would exempt the Governor and his Administration from Maine freedom of access rules, make it more difficult for the unemployed to collect jobless benefits, further weaken the collective bargaining rights of public employees and child care workers, “reorganize” the Department of Health and Human Services to eliminate critically important services, and weaken water quality and other environmental protections associated with mining.

Ramming these proposals through in the waning days of the session without sufficient opportunity for public scrutiny and comment is not the way Mainers expect their legislators to conduct the people’s business.  Join us in contacting your Representatives and Senators to tell them to act responsibly and to vote no on LD 849 and the other proposals identified in the “Day of Action Briefing” materials.  If you’re unsure how to reach your Legislator, contact information for Representatives is available here and for Senators here.