2017-02-23 / News

Area senator maintains support for tax on ‘wealthy’

By Garrick Hoffman
Staff Writer

AUGUSTA – Criticizing opponents of the Stand Up for Students initiative who seek to repeal it, Maine state Sen. Justin Chenette (D-Saco) said his support for the initiative remains strong.

“We need to hold the line on Question 2 for our students and our property tax payers, and reject any policy that benefits the few at the expense of the many,” Chenette said after a public hearing Friday, Feb. 10, in Augusta.

The hearing involved tax changes in Gov. Paul LePage’s proposed budget. Under the budget, the income tax – which rises as income rises – would be abolished, and a flat income tax of 5.75 percent would be imposed by 2020.

Stand Up for Students, or Question 2, is a ballot initiative passed last year that places a surcharge on individual and household incomes exceeding $200,000 by 3 percent to fund Maine’s public schools. It’s estimated that the surcharge would generate $157 million per year, with funds going into a state fund and distributed to schools throughout Maine on the basis of need. The funds would only be used for “direct” support, such as teachers’ salaries, but not for administrative salaries.

LePage’s proposed budget would effectively nullify the 3 percent surcharge on the state’s highest earners because their tax rate – which increased to 10.15 percent from 7.15 percent after Question 2 passed – would be cut almost in half with the proposed flat tax of 5.75 percent.

According to the Maine Attorney General’s Office, money from the fund would be distributed to schools under the existing school funding formula. By July 1 of each year, each school district would be required to file a report with the Department detailing how the funds were used to provide direct support for student learning.

The initiative won by a narrow margin: 383,428 votes to 373,848 votes, or a 1.26 percent margin, according to the Maine Secretary of State.

Opponents requested a recount, but eventually recanted and conceded.

In 2004, Maine residents voted to require the Legislature to provide 55 percent of funding for the state’s public education system, but it has never met this demand, according to the Stand Up for Students website.

“It is amazing to me that so many lobbyists and business interests came here today to urge the people’s elected representatives to the Legislature to overturn the expressed will of the people,” Chenette said in a press release posted on his website. “What kind of precedent would it be for a handful of representatives and senators to so quickly and blithely overturn the results of an election? The folks that need a break in this economy are not the highest earners. We cannot continue to shift the tax burden away from those most able to pay onto the backs of those least able to pay.”

Ryan Parker, a Newport resident and former staff member for former U.S. Rep. Mike Michaud who advocated for Stand Up for Students, said in a telephone interview that Chenette’s sentiments were reasonable.

“I support the 3 percent tax because it’s an option that’s being used because the Legislature hasn’t come up with an alternative funding mechanism, despite the opportunity to do that,” Parker said. “(The initiative) is a good measure to cover” the state’s budgetary shortfall for education.

Parker said education funding is more about economic development in municipalities.

“If you look at what draws people into a community to buy a house, start a family, run a small business – it is the schools. It’s the first thing people look at. If they’re not functioning properly, people won’t want to move there.

“If we want to bring more people into our communities – which we need to – and increase the tax base, we need to look at education as a means of economic development. If the government wanted to avoid this (3 percent tax), all they had to do was follow the law,” which it hasn’t done, Parker said.

Dana Connors, president of the Maine State Chamber of Commerce and an opponent of Stand Up for Students, disagreed with Chenette’s sentiments, saying that while he and other opponents of the initiative support fulfilling the financial needs for education in Maine, the initiative was a two-part issue that didn’t give voters flexibility when voting.

“(The initiative) won by a narrow margin and there were two parts of the issue,” Connors said. “One dealt with education funding and the other with tax policy.

The full question on the ballot read,Do you want to add a 3% tax on individual Maine taxable income above $200,000 to create a state fund that would provide direct support for student learning in kindergarten through 12th grade public education?”

The official ballot summary on Maine.gov reads:

“This initiated bill establishes the Fund to Advance Public Kindergarten to Grade 12 Education for the purpose of improving the ability of the State to reach the annual target of 55%, as specified in statute, for the state share of the total cost of funding public education from kindergarten to grade 12, and for increasing direct support for student learning rather than administrative costs. Revenue for the fund is generated by a 3% surcharge on Maine taxable income over $200,000, beginning with tax years beginning on or after January 1, 2017.”

“It’s hard to answer both of those if your overriding desire was to fund education,” Connors said. “That’s what we’re finding has been consistent. People want the obligations to be met with the state funding education by 55 percent. To vote for this, voters had to go along with the increase in tax.”

In his public comment submitted to the state of Maine and published in the Maine Citizen’s Guide to the Referendum Election, Connors said the distribution of funding would be unfair, as “60 percent of the money raised from this new tax goes to 12 percent of towns (in Maine).”

Connors said the tax increase damages the economy and prevents business professionals from moving to Maine.

“There’s no question that it’ll hurt the economy,” Connors said. “We’re already finding that there are a number of businesses that are looking . . . at Maine for purposes of expansion or growth, but may choose New Hampshire because they don’t have that tax. We’re hoping to attract professional services to Maine. The tax hurts attracting professionals we need to grow our economy . . . It discourages them from coming here. If they look at our state, they aren’t interested” when they see the tax.

Finally, Connors said the tax doesn’t just impact wealthy individuals – though it does negatively impact them - but it could also impact a husband and wife as a joint statement or household income.

“It goes well beyond that,” Connors said, referring to the tax’s impact on joint household incomes. “If you’re a company that’s family-owned or any company . . . you’re affected by this as well. Two-thirds of those estimated to be impacted are small businesses.

“Those so-called wealthy making over $200,000 and labeled as the 1 percent, they have been job creators in Maine,” Connors continued. “They have given to nonprofits, have acted philanthropically and they’re probably the most mobile. We can have what’s put forward to meet educational needs – we support that,” Connors said.

In 2016, Maine was listed in a Forbes article as the second-worst state for business, with high overhead and startup costs, a strict regulation environment, poor economic growth prospects and a weak labor supply as factors. In 2010 and 2013 the magazine listed Maine in dead last.

U.S. News & World Report listed Maine in 2016 as the seventh-best state for high schools. Biddeford, Saco and Old Orchard Beach high schools are not listed in Maine’s top 10.

“There’s a better way, there must be,” Connors said, “that doesn’t hurt our economy and discourages people from coming here.”

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