Tax Policy in Maine: Critical Issues

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Tax Policy in MaineCritical Issues

• Presented by Matt Murray
• Professor and Head, Economics and
• Associate Director, CBER
• University of Tennessee, Knoxville

Presented to Maine State Legislators
Forum Augusta, Maine - Thursday, December 13, 2001
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Tax Policy Goals

• Economic development
• Yield, neutrality, stability, elasticity, equity,
  others
• Portfolio balance

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Tax Burdens

• High Tax Burdens
• Per capita
• As a share of personal income
• State surveys

• Lack of Balance
• Municipal property tax
• Only 7 states with higher PIT rate

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Tax Burdens

• Re-evaluate service needs

• Taxpayer Responses
• Tax limitation movements
• Mobile capital
• High income taxpayers

• Balance tax system
• Broad bases
• Low rates

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Stability and Elasticity

• Taxes generally procyclical

• Stability
• Rainy day funds
• Sales tax on food
• Services (careful!)

• Short-term stability v. long-term elasticity

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Stability and Elasticity

• Elasticity keep it strong!
• Reduce reliance on PIT
• Sales tax rate/base

• Gross receipts
• B-E-T

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Fiscal Discretion and Autonomy

• Increasingly compromised, both state and local

• Highly centralized finances at state level

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Fiscal Discretion and Autonomy

• State
• Revenue sharing
• BETR
• Property tax relief
• Local
• Break in property tax-benefit linkage
• TIF
• No local alternatives to property tax

• Limit earmarking, hold harmless provisions
• Broaden local taxing authority
• Local sales, gross receipts taxes
• County v. municipal government

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