Tax cuts unfairly attacked as giveaway to ‘the rich’
By Rep. Mike Willette
As I have been out and about talking with constituents in my district, one topic has been steadily cropping up. It is the issue of taxes, particularly the tax reforms we passed last year. The reactions run the gamut from delight to outright confusion. I hope to clear up some of that confusion.
The charge that I hear quite a bit from people is linked primarily to the Democrat candidates in local races. They are telling folks that we doled out “huge tax breaks for the rich.” This type of misinformation has also made its way into newspaper columns, Facebook posts and now political ads on TV.
The prevalent canard being tossed about by the opposition is that the tax cuts are stacked to benefit only the wealthy. That couldn’t be farther from the truth. What they fail to mention is that the tax cuts are tilted in favor of low- and middle-income groups. Maine Revenue Services (MRS), an objective referee, refers to the new system as “progressive.” That means that taxpayers at the bottom and middle parts of the income scale will receive a larger percentage reduction in their income tax liability compared to upper-income taxpayers.
What is also left out of their spin during conversations they have with voters is that most legislative Democrats supported the tax changes when they voted for the biennial budget.
The apparent strategy of the opposition is to score cheap political points with falsehoods and distortions in hopes that some people will actually believe the fallacies being spread about.
Let’s keep in mind that the people pushing this mantra of class warfare and coining the phrase “tax cuts for the rich” are the same people who had control of tax policy in Augusta for decades. They used their time in power to grow government to the point where taxpayers could not afford it.
In two short years, the new Legislature led a return to fiscal responsibility. We rescued the public pension system, eased regulatory overkill, tightened up the welfare system and cleaned up waste, fraud and malfeasance at the Maine Turnpike Authority. The 125th Legislature was epic in terms of accomplishments, capped off with the biggest tax cut in Maine history.
We understand that states creating jobs and economic vitality are those that are cutting taxes, not raising them.
Let’s examine some basics of the tax reform program.
The major income tax cut provisions take effect on Jan. 1, 2013. Over the course of the state’s 2012-13 budget cycle (ending June 30, 2013), the cuts total about $150 million. Beginning in fiscal 2015, with all cuts in effect, the net cuts enacted by the Legislature will add up to approximately $235 million per year. The Beacon Hill Institute at Suffolk University calculates that the tax cuts will generate at least 3,700 jobs by 2015 and increase Mainers’ disposable income by over $270 million.
On the income tax front, most Mainers will benefit from large increases in standard deductions and personal exemptions to conform to the federal amounts. According to MRS, approximately 460,000 families will see an average tax decrease of $337 in 2013. The top rate is reduced from 8.5 percent to 7.95 percent, and the 0 percent rate largely replaces the 2 and 4.5 percent brackets.
Consider some typical situations. In 2013, a family of four electing the standard deduction will owe no income tax if their adjusted gross income (AGI) is below $35,700. The previous no-tax threshold was $21,000. Additionally, a family of four with an AGI of $50,000, using the standard deduction, will enjoy an income tax cut of $300 – a 24.4 percent reduction.
But what about “huge tax cuts for the rich?” According to Maine Revenue Services, households in the top 10 percent will get an average tax cut of $994 in 2013. Bear in mind, they pay the vast majority of income taxes. In fact, the top 20 percent of income-earning families ($75,000 and up), pay 76 percent of all income taxes collected. Since they pay a lot more in taxes, their cuts are proportionately larger.
In the final analysis, the 80 percent of taxpayers in the low and moderate groups, who currently pay only 24 percent of all income taxes, will receive 33 percent of the cuts. The richest 10 percent (over $119,000) will see their share of total income taxes collected rise from 55 percent to 57 percent, while the percentage of the burden paid by all other income groups will decline.
This is genuine tax relief. It’s unfortunate that some people see the need to gain ground via political mendacity and fostering the damaging message of class warfare.
Final proof that we are heading in the right direction can be seen online by visiting http://www.usdebtclock.org/state-debt-clocks/state-of-maine-debt-clock.html. It is our Maine State debt clock, and it is actually running backwards for the first time in many years.
State Rep. Mike Willette (R-Presque Isle) serves on the Veterans and Legal Affairs Committee.
