MPA’s ‘Universal Home Care’ initiative does little to help elderly, disabled Mainers

November 29, 2017 Posted by Nick Murray - No Comments

By: Jacob Posik, policy analyst

Supporters and volunteers of the Maine People’s Alliance (MPA) were set up at polling booths across the state on Election Day seeking signatures for a “Universal Home Care” initiative the group wishes to put on your 2018 ballot.

The MPA announced in late September their campaign to gather signatures for the initiative, which would supposedly provide in-home care services to elderly populations and persons with disabilities, regardless of income, by imposing three new taxes on Mainers.

However, the language of the referendum question approved by the Secretary of State’s office outlines a massive income redistribution scheme under the guise of in-home care services.

To begin, the bill imposes three new taxes on the Maine people. The first is a 1.9 percent payroll tax for employers on wages paid to employees over $127,200, or the income threshold subject to social security employment tax. The second is a 1.9 percent tax on employees for wages earned over that same threshold, combining to form a 3.8 percent payroll tax on wage earnings over $127,200. The last tax, also assessed at 3.8 percent, is imposed on nonwage earnings over $127,200.

Under the plan, all taxes collected must go into the Universal Home Care Trust Fund. However, only a small portion of revenues generated by the initiative would actually be spent on providing care to elderly and disabled Mainers. In-home care providers and other cooperating entities who receive funds from the Universal Home Care Program must spend a “minimum of 77 percent” of the funds they receive on “direct service worker costs.”

This initiative would be devastating for Maine’s small business economy. Sole proprietors who earn over the income threshold subject to social security employment tax will be required to pay both portions of the 1.9 percent taxes included in this initiative, and if they have additional nonwage earnings, they will pay an additional 3.8 percent tax on those earnings come tax season.

A lot of ink has been spilled detailing the catastrophic consequences of crafting tax policy through public referendum, as left-wing groups in Maine did in 2016 with a 3 percent surtax on high-income Mainers. Passing major legislation without hearings, work sessions, or opportunities for amendment or compromise is a lousy way to make law.

But if you thought 2016’s ballot measures were bad, the Universal Home Care initiative would create a massive government program to provide in-home and community support services for disabled and elderly Mainers — regardless of income — at a cost of hundreds of millions of dollars annually.

We have previously published an article by Governor LePage that lays out many of the negative effects such a program would have — poor oversight and lack of bureaucratic accountability, forced unionism for home care workers, unclear spending rules that leave the door wide open to fraud and abuse, and longer wait lists for needy Mainers. On top of these valid concerns, the program would cost a whopping $310 million, according to the Maine Legislature’s nonpartisan analysis office.

To put that in perspective, Question 2 in 2016, which imposed a 3 percent surtax on income over $200,000 and was almost universally opposed by economists and business leaders, was projected to raise approximately $157 million annually.

How do the wizards at the Maine People’s Alliance intend to raise this enormous sum of money, year after year? By taxing the very people who contribute the most to our economy, of course (forget that the top 10 percent of households in Maine already pay more than 56 percent of all individual income taxes, according to a 2014 study).

Further, according to the Bureau of Labor Statistics, 24 occupations in Maine earn more than $100,000 per year, of which nine have been designated “in-demand.” Maine’s high tax burden already makes it difficult to attract doctors, scientists, engineers, and other professionals. This initiative would exacerbate this trend, to the detriment of our economy.

Maine desperately needs to adopt pro-­growth policies that attract young, hard-­working families from across the country and around the globe. Maine’s current high-­tax policies contribute to the opposite trend: “tax flight” into low-­tax states. Almost universally, research on the effects of tax rates on migration patterns has found that variations in income tax rates are associated with small but significant effects on net out-­migration from a state, as well in declines in in-migration.

In 2016, using the highly-respected STAMP economic model, the Maine Heritage Policy Center estimated that a 3 percent surtax on incomes over $200,000 would cause the loss of more than 4,000 jobs in 4 years, as well as substantial reductions in business investment and real disposable income. Given the much lower threshold envisioned by the current proposal ($128,400 vs. $200,000) and the higher tax rate (3.8 percent vs. 3 percent), it is certain that the effects of the home care initiative would be even more destructive.

Fiscal discipline, not exorbitant tax rates, will lead Maine to prosperity.