Misleading Tax Op-Ed


Today, an op-ed in the Portland Press Herald by Kay Rand suggests that the Tax Foundation’s annual state and local tax burden rankings is misleading and overstates Maine’s tax burden.
In the interests of full disclosure, it should be noted that I authored several years’ worth of the Tax Foundation’s tax rankings. However, it should also be noted that Kay Rand serves on the board of the Maine Center for Economic Policy–a well-known apologist for big government. This fact was not mentioned in the op-ed.
That being said, I never received a phone call from the author to discuss the so-called flaws in the Tax Foundation report . . . continue reading for more thoughts on this flawed op-ed.

First, she claims to be relating information that came out of the recent tax forum her firm recently hosted. However, not once does she mention the hardships that Matt Jacobson, CEO of Maine & Company, faces everyday when trying to convince businesses to come to Maine. Matt was a participant of the conference and he says that all his efforts must first be prefaced with an explanation/apology for Maine’s high state and local tax burden–something his counterparts in other states do not face. Matt is in the trenches everyday fighting for Maine’s economy, if he says taxes are problem–they are a problem.
Secondly, the “tax burden borne by out-of-staters” cuts both ways. In a new report, the Tax Foundation details its economic assumptions. Table 1 in the report shows the results of their comprehensive “state and local tax incidence” analysis. Overall, Maine is a net importer of taxes to the tune of $116.8 million in 2007. This is broken down by type of tax. Maine imports $51.8 million in severance taxes (taxes on oil, coal, etc.), $64.5 million in corporate taxes (profits and licenses) and, most surprising, $0.5 million in tourism taxes. Ah, we thought tourism dollars is a one-way street. Not so, Mainers pay taxes too when they go on vacation . . .
Finally, the point of the op-ed is to convince the reader that “this means that we have to focus on building incomes just as much as cutting taxes, and that one of our best hopes for long-term tax relief is wise economic investing.” This assumes that it does not matter WHO is doing the investment–government or private business. Plenty of my own research says it does matter, see here, here and here.
Oh, and one last point, the Tax Foundation analysis also excludes debt, i.e., deferred taxation, tax compliance costs, and the deadweight loss due to taxation. All would increase the “burden of taxation.”