Testimony: Phasing Out the Income Tax (LD 835)
Testimony in Support of LD 835: “An Act to Phase Out the Income Tax”
Senator Grohoski, Representative Perry, and the distinguished members of the Committee on Taxation, my name is Nick Murray and I serve as director of policy for Maine Policy Institute. We are a free market think tank, a nonpartisan, non-profit organization that advocates for individual liberty and economic freedom in Maine. Thank you for the opportunity to testify on LD 835.
Income tax revenues are projected to amount to about $2.2 billion per year over the next biennium. It funds more-or-less 16% of all state government expenditures in a single year, though it makes up about 45% of the General Fund. This bill would order a ratcheting-down of spending of all state departments commensurate with cutting back income tax collections by one-fifth every year over five years.
The first year of LD 835, under the 80% multiplier, would cost about $440 million. There is surely plenty of spending to cut back and dedicate to the type of real tax reform LD 835 promises, given the growth of the last two biennial budgets.
Over the last four years, Maine state government has grown inflation-adjusted spending per capita by 10%. If Gov. Mills got her entire budget wishlist, this would grow to 20% over six years. Have Mainers received a better economy or a more responsive government for this extra spending?
Our budget trajectory is unsustainable. At some point, DC inflating the dollar will not help us; Mainers will be on the hook for the state’s profligacy. Legislators may consider policy to earmark funds to specific programs and offices to ensure priority spending areas are taken care of, instead of allowing tax revenues to flow to the General Fund to be wasted on politicians’ next favorite project.
LD 835 would bring on the kind of transformative change present and future Mainers need to prosper, so no resident will pay income taxes by 2028. It would put Maine and our economy on a serious trajectory of growth. We would then be able to realistically compete with Massachusetts and New Hampshire.
The state would attract businesses and workers to help our struggling labor force, shore up supply chains and stabilize spiraling prices. Young families looking to live in the northeast would seriously look at Maine to raise children, providing a buttress against the drop in public school enrollment experienced across the state.
Please deem LD 835 “Ought To Pass” and chart a course of real growth for Maine. Thank you for your time and consideration.