2013 Maine Municipalities Warned to Tighten their Belts as Seed Capital Tax Credit Expands Eightfold

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Compiled from various notes: 

Feb 2013 An Act To Provide Greater Access to Capital for Certain BusinessesThrough Advance Payment of Employment Tax IncrementFinancing Benefits 

SUMMARY 36 This bill allows the Commissioner of Economic and Community Development, under 37 extraordinary circumstances, to provide advance payments of employment tax increment 38 financing benefits to a qualified business based on a net present value calculation of the 39 projected employment tax increment financing benefit to the business. The advance 40 payment must be made in the form of a loan through the Maine Rural Development 41 Authority, pursuant to applicable conditions and requirements.

Commentary This refers to the (up to) 80%payroll  tax credit that the state provides to its targeted sector- or in other words that the state requires the tax-paying sector (employees , retail sector, other businesses in the UN-targeted sector) to pay on the targeted sector’s payroll taxes. This statute says that the targeted sector business can collect those payouts (from the UN-targeted sector) in advance- talk about the workers being a commodity (as did Marx) here you have it- the owner of the means of production can now get his re-reimbursement before he hires the employees. The amount of money that the capitalist gets is a function of the employees that he is anticipated to hire and the financing of the payout comes from other workers and other businesses, which the state dis-qualifies from offering “quality jobs”pursuant to the definition of quality jobs as providing higher than average (taxable) employee  income. The fact that the UN-targeted business has to pay its fair share of the targeted sector’s payroll tax makes it affordable for the targeted sector to create those “quality jobs ( jobs that pay higher than average) as it increases the burden on the UN-targeted sector designated by the state as creators of  “UN-quality jobs” ( jobs that pay an average wage or below-in other words middle class jobs) making it all the harder for the tax-paying sector to rise to the level where they can offer “quality jobs” and thus enter the strata where in others pay most of their payroll taxes- although they might have to move to a different state to get in on the deal! 

So in other words , the legislature is dishing out money to capitalists in exchange for income tax revenue that doesn't exist yet - but the money has to come from somewhere TODAY if it doesn't exist theoretically until tomorrow- No Problem! the legislature can just pass a temporary increase in sales tax !

October 2013 Sales Tax Rate Changes Effective October 1, 2013 Sales tax rate increases recently passed by the legislature take effect on October 1, 2013.Sales tax rates  have been temporarily increased from October 1, 2013 through June 30, 2015.  The general sales tax rate of 5% will increase to 5.5%.  The 7% tax rate on the rental of living quarters, sales of prepared food, and sales of liquor sold on premises will  increase to 8%.   The 10% tax rate on short term rentals of automobiles remains unchanged.

Aug 2013  LePage said in a letter he has been sending to municipal officials across Maine that his proposal to cut nearly $200 million in municipal revenue sharing for the next two years was forced by exceedingly tight budgets in other areas. He urged municipal officials to replace their complaints with their own ideas to match government spending with available revenues. In the letter, which LePage spokeswoman Adrienne Bennett said has been sent to dozens of municipal officials in recent weeks, the governor said he couldn’t cut debt services because the “state must pay its bills” and couldn’t reduce funding for the judicial branch because the state’s courts are running behind schedule.

“Other core state functions — state police, corrections, our natural resources agencies — have been cut to the bone to feed continued growth in education and welfare spending, and they cannot be cut any further without reducing public safety or our future economy,” wrote LePage. “That leaves only the three large pots of money, and I chose revenue sharing.” Bangor Daily News

LEPAGE 2015 Budget
There is a significant sum, equitable to the amount identified to be cut from municipal revenue sharing in LePage's 2013 speech,  identified as Other conformity items 5102(1-D) $150 to 250 million per year. About that sum, it is said:

Tax expenditures resulting from conformity to Federal AGI that do not involve an above-the-line deduction on the Federal Form 1040 are particularly challenging to estimate due to a lack of data. For this reason we isolate these expenditures at the end of the income tax section and provide specific estimates only for the largest expenditures. These estimates, based on the JCT study, are only intended to convey the order of magnitude of the expenditure.
All tax expenditure estimates in this report reflect revenue loss to the General Fund. 

In 2013 The Legislature also passed a bill which expands the states totalitarian  nature in  managing not only state corporations and it's network of public private relationships but also relationships between private businesses. Which businesses are included will be the same as the state's targeted sector. Since the state has concentrated capital redistribution in Maine and at the same time has included intellectual property rights in numerous state corporation charters, this is of a nature similar to the New England Foundation for the Arts, with whom the Maine Arts Commission partners and which channels NEA funds and  has a terms of agreement laying claim to the global copyrights of whoever uses its site for all eternity,  which I have been writing about since 2007- Here is the latest development in that Bait & Switch at The New England Foundation For the Arts

2013 §3304. Industry partnerships

1. Objectives.  The objectives of an industry partnership are to:

A. Organize businesses, employers, workers, labor organizations and industry associations into a collaborative structure that supports the sharing of information, ideas and challenges common to their industry cluster; [2013, c. 368, Pt. FFFFF, §1 (NEW).]

I went back to try to find the bill text for §3304. Industry partnerships to determine its fiscal impact but my searches kept bring up the fiscal impact for An Act to Strengthen Maine's Workforce and Economic Future

The fiscal notes summary for this bill states:

This amendment removes General Fund appropriations to the Department of Corrections of $955,500 in fiscal year 2013-14 and $1,313,417 in fiscal year 2014-15, removes the General Fund appropriation to the Executive Department of $100,000 per year beginning in fiscal year 2013-14 and reduces funding to the Department of Labor by $114,017 and $112,208 in fiscal years 2013-14 and 2014-15, respectively. The bill as amended by this amendment has a General Fund cost of $2,250,000 in fiscal year 2013-14 and $2,765,000 in fiscal year 2014-15 as shown in the table below

So it is fair to say that the  budget which has "been cut to the bone to feed continued growth in education means  to feed workforce training for the state corporate grid.  The University of Maine is a corporate instrumentality of the state with the legislature having jurisdiction over curriculum. The University of Maine maintains its own Advanced Manufacturing Center and various other businesses. The educational funding will be targeted to finance training in the state's own corporate grid and its public-private partnerships, giving advantage to the corporate state over private industry not included in its public private relationships. in 2015 the Maine legislature wants to merge the Maine Community College system into the University of Maine- giving the state corporate grid even more power and access to public funding to train its own workers.

Also in 2013, while Governor LePage is warning Maine's local governments to find a way to tighten their belts, the legislature passes the Expanded & Improved Seed Capital Tax Credit, which I have written reams about in this blog- suffice it to say that although it is called a tax credit, it is expanded by including non-residents. .Since the tax credit is refundable, if no taxes are owed (non-residents do not owe Maine taxes) then investors will receive a refund of up to 60% of their investment while retaining all profits. Investors living in Maine are just as likely to not owe taxes thanks to the Pine Tree Zone tax exemptions. This bill was "improved" by increasing the rate of direct transfer of taxpayer dollars to capitalists by eight fold causing the then CEO of the FAME corporation to testify in favor of restraint:

One suggestion we would offer concerns private venture funds in Section 3 of the bill. The proposed language would modify existing I0 M.R.S.A.§ 1100-T(2—C) paragraph (D) to increase the limit on tax credits for private venture capital funds from $500,000 to $4 million. This is a rather larger increase from the current limit. We think a more modest increase of $1 million is preferable and would better limit the fiscal impact of the bill. Testimony by Elizabeth L Bordowitz,Chief Executive Officer Finance Authority of Maine 

But restrain they would not! Leave that to the municipalities!

To the best of my determination, this 1977 law blanket exempting small business investment companies from taxation has not been repealed, making the "refundable tax credit" as found in the Seed Capital Tax Credit into a direct cash paynment of up to 60% of an capitalist's investment mandated by the Maine state legislature to be taken out by Maine state taxpayers pockets and redistributed to private investors

Here is some text from that bill-passed as LePage is warning the municipalites to tighten their belt because municipal revenue sharing is going to be discontinued!

Details of the Expanded and Improved Seed Capital Tax Credit as passed in 2013

1. ·Removing limits on the life of a capital fund ( after following the references back to the original statutes, the limit that I found is to the length of time that the investor has to collect his tax credit pursuant to the limitation imposed that it must not be greater than 50% of his total tax due. There has been a 15 year limit imposed on the investor in which  his tax credit can be applied....until now.
2. The following sentence is added to the definition of a venture capital fund: An entity that otherwise qualifies as a private venture capital fund may elect not to be treated as a private venture capital fund for purposes of this section with respect to any proposed investment.
3. The amount of annual gross sales for the business receiving the investment has been changed from $3,000,000 or less to $5,000,000 or less.
4. The requirement that the operation of the business must be the full-time activity of the owner has been changed to  a substantial professional activity of at least one of the principal owners, as determined by the authority
5. The requirement that the eligible business bring capital to the state has been struck out.
6. In section D  in which limitations on the investment to  which any entity is applying are discussed, the word "entity" is struck out and replaced with "private venture capital fund"
7. Section D changes the aggregate limit for a private venture capital fund from $500,000 to $4,000,000 and strikes out the individual limit within the aggregate for entities treated as a flow-through entity for tax purposes.
8. Changes the annual gross sales allowed for eligible businesses from $3,000,000 to $5,000,000
9. Changes the requirement that the operation of the business must be the full-time activity  of the principal owner to substantial professional activity of one or more individuals who are not managers of the private venture capital fund, as determined by the authority.
10. Changes the prohibition against a tax credit certificate being issued to a private venture capital fund if an investor in the fund is a principal owner of the eligible business or a family member of the investor has any existing ownership interest in the business. by striking out "investor" and replacing it with "manager of the fund".
11. Increases the amount of that the tax credit is not allowed to exceed , which was  $2,000,000 in 1996 and becomes $5,000,000 in 2015-

Lepage didn't sign the Seed Capital Tax Credit, saying it wasn't "impactful enough" A close reading of that bill reveals that it contains size limitations which would have prevented it from being applied to Lepage's failed jobs bill of 2014 which expanded the availability of Pine Tree Zone Tax Exemptions to big businesses.

The Expanded and Improved Seed Capital Tax Credit was unanimously supported in Maine Senate

It was passed by the House- no roll call available.

Time line of Incrementalism

1987 Seed Capital Tax Credit established 30 % of capitalist investment covered by taxpayers spread out over 2 years.

2001 chunk of investment paid by taxpayers goes from 30-40%. Rate of transfer from people to owners of the means of production escalated by 50%- spread out over 7 years

2011 Maine Seed Capital Tax Credit Amended to increase the amount paid by taxpayers to 60% of capitalist's investment

2013 Taxpayer now pays 60% of capitalists investment spread out over four years- rate of transfer of wealth from taxpayers to the owners of the means of production escalated eight fold. The legislature calls the bill “The Expanded and Improved Seed Capital tax Credit” Expanded indeed! Improved? Only for the capitalists!

The following is a quote from the statute for the Maine Capital Corporation", which is repealed but reincarnated in current network of state corporations

This impediment to the development and expansion of viable Maine businesses affects all the people of Maine adversely and is one factor resulting in existing conditions of unemployment, underemployment, low per capita income and resource underutilization. By restraining economic development, it sustains burdensome pressures on State Government to provide services to those citizens who are unable to provide for themselves. (emphasis mine)

To help correct this situation, it is appropriate to use the profit motive of private investors to achieve additional economic development in the State. 

This can be accomplished by establishing an investment corporation to provide equity capital for Maine businesses and by establishing limited tax credits for investors in the corporation to encourage the formation and use of private capital for the critical public purpose of maintaining and strengthening the state's economy.

Repeating the justification given by Governor LePage for eliminating revenue sharing:

Other core state functions — state police, corrections, our natural resources agencies — have been cut to the bone to feed continued growth in education and welfare spending, and they cannot be cut any further without reducing public safety or our future economy,” wrote LePage. “That leaves only the three large pots of money, and I chose revenue sharing.

If the first justification (1976) for establishing state corporatism was that it would relieve the state of the burdensome pressure of taking care of those unable to care for themselves- obviously the function put forth to justify state capitalism has failed, and so, as it is popular to do in the current  culture of politics, we should be "having a conversation"  about why state capitalism is still expanding instead of being the first item on the cutting block, having so consistently and resoundingly failed in it's self justifying purpose !

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