Testimony in Support of LD 327: “An Act To Return Surplus Money to Maine Taxpayers”
Senator Breen, Representative Pierce, and the distinguished members of the Committee on Taxation, my name is Nick Murray and I serve as policy analyst for Maine Policy Institute, a nonpartisan, non-profit organization that advocates for individual liberty and economic freedom in Maine. Thank you for the opportunity to testify on LD 327.
The famed existentialist author Albert Camus once said, “It is no more immoral to directly rob citizens than to slip indirect taxes into the price of goods that they cannot do without.” In this moment of three-decade level inflation, what is often referred to as “the hidden tax,” Camus’ sentiment rings truer than ever, and especially so for those living on strained or fixed incomes. It is common knowledge that Mainers are looking at substantially higher electricity and heating oil prices in the future, in addition to the record inflation for food and other essential goods we are experiencing today.
We commend Rep. Hanley and Sen. Stewart for sponsoring this bill because returning surplus tax revenue to the people is the right thing to do. Policies that reduce economic barriers when “triggered” by revenue that exceeds appropriations are some of the most responsible, fiscally-conscious steps that legislators can take for the long-term health of the economy. Doing so can build stability into the system where people can transact, invest, and build their projects and enterprises. Put another way, if current and prospective Mainers can see a tax cut coming, they will be less inhibited to pursue their own economic success here.
Reducing the overall tax burden on Mainers should be a paramount goal in every legislative session. A 2021 WalletHub study that compared different state property taxes, individual income taxes and sales and excise taxes as a share of total personal income found Maine to have the fourth-highest in the country at 10.5%. For context, Massachusetts ranked 21st and New Hampshire was 46th.
There are multiple avenues by which legislators can return surplus revenue to the people. In discussions around this legislation, and negotiations on the upcoming supplemental, you will likely hear many proposals that involve bolstering certain programs or expanding certain tax loopholes or giveaways. But these will not drive long-term economic certainty, and will not set Maine up for a generation of success, rather than a generation of dependence.
While we understand the desire to send direct checks to Maine people, as we saw from the last round of payments, Mainers do not receive them for months, and the program demands a slice of the people’s money for unnecessary administrative costs. Send every cent of available funds back to the people in the form of direct, structural tax relief instead.
As Governor Mills has signaled, this committee may also wish to focus relief to Mainers who are struggling the most. In that case, targeting consumption taxes like the service provider tax, fuel tax, and sales tax may be a consensus path. This bill could offer a revenue cascade to pay down each of these tax rates at amounts relative to the amounts of excess revenue generated.
Since the service provider tax brings in less than $110 million over the biennium, and levies a higher rate than the sales tax on select services (including DHHS-licensed home care and mental health services), the revenue cascade could aim to pay down that rate completely before making up for other rate decreases.
We look forward to seeing how this bill progresses, and hope that legislators can come to a consensus that Maine people are hurting more than the state government, and deserve to decide where this money is ultimately spent. Thank you for your time and consideration.