The Lepage Plan- Filled with Inconsistencies

Tweet This http://goo.gl/dp9zpP

In recent weeks we have been hearing that LePage wants to eliminate the income tax. My initial response was I'll believe it when I see it . During his tenure, LePage has agressively advanced corporate welfare, which our legislature and administration justify via the means of an income tax on labor. The state of Maine, being in fact today the corporation of Maine, and run in the interests of profit would not be able to justify the massive tax payer give-a-ways to capitalists without claimimg such a policy is profitable because it produces a high end labor tax base which brings in the revenue.

So when LePage floats the concept that he wants to eliminate the income tax, I say that even if that were actually Lepage's intent it is highly improbable that it can ever happen without first deconstructing the corporate state and its ever expanding corporate welfare system. To start with expanding the instances in which sales tax will be collected is equivalent in strategy to granting amnesty to illegal aliens without first securing the border. To create a media buzz that one wants to eliminate the income tax and replace it with a tax on consumption, and then to try to institute an expanded consumption tax while merely lowering the income tax takes on the appearance of a hoax. There is no actual action being taken toward eliminating the personal income tax and if there were the starting point has to be the de-construction of corporate welfare which is dependent on the personal income tax on labor to justify it's tax payer freebies distributed to capital. There are far too many power players making a buck on the corporate welfare system to imagine that one can simply take the rug out from under it with the wave of a magic wand!

In LePages  failed 2014. An Act To Improve Maine's Ability To Attract Major Private Investments The benefits to capitalists are similar to those of the Pine Tree Zone. The state commits the Maine taxpayer to covering up to 80% of the business owners payroll taxes. The taxed sector includes targeted sector workers and most of the state’s “UN-targeted sector”.so that the targeted sector employee is paying his own income taxes plus his fair share of his employers income, corporate and payroll taxes.

Nothing makes clearer the trade off of an income tax on labor in exchange for a tax free ride for capital than the section enumerating the qualification for a qualified employee: Can we really believe that Lepage has suddenly made an about face? 

7.  Qualified employee.   "Qualified employee" means a person:

A.  Who is a full-time employee of a certified or qualified applicant;

B.  Whose income from employment under paragraph A is taxable under chapter 803;

C.  For whom a retirement program is provided subject to the federal Employee Retirement Income Security Act of 1974, 29 United States Code, Sections 101 to 1461, as amended;

D.  For whom health insurance is available; and

E.  Whose income calculated on a calendar year basis is greater than the per capita annual income in the State as determined by the United States Department of Commerce.

Note that in 2012 An Act To Provide Tax Relief for Maine's Citizens by Reducing Income Taxes  was passed, lending the impression that there is a plan in the works to eliminate the income tax- but in 2014 , An Act To Improve Maine's Ability To Attract Major Private Investments is clearly setting up a trade off granting capital a tax free ride and in exchange capital will deliver taxable employees making a higher than average income -ie  a revenue stream for the Maine corporation based on an income tax on labor !

So I decided to read Lepages's budget and found it irresistible not to record my own commentary as I read: Quoting here from the budget report:

National and state economic indicators continue to show improvement since the CEFC met in January 2014. Nationwide, consumer sentiment and small business optimism are up over year ago levels. According to preliminary estimate, personal income in Maine grew 3.4% year-over year in the first half of 2014, while wage and salary income grew 2.3% over the same period.The Consumer Price Index was 1.7% higher in August 2014 than it was in August 2013.  

  Statement found in introduction to Lepage budget provides no source  . The CEFC apparently stands for Maine Consensus Economic Forecasting Commission, which is a forecasting commission and part of Maine.gov, but the growth statements are given in the past tense. To say income is up begs the question "for whom" while reading the section below called Individual Income Tax underscores my observation that the (past tense) statement in the paragraph above is given without explanation or source unless one accepts a self referential source as a legitimate source.

  Sales and Use Tax – Sales and use tax receipts increased by 2.5% for the 12 months ending in September 2014. The current revenue forecast assumes continued improvement bolstered by lower energy prices and an improving labor market. 

Do we believe what the Lepage budget report tells us -or do we believe the word on the street last summer- that the summer retail season was the slowest one ever! If the revenue from retail sales wasn't coming from Main Street then from where? And if it was coming from someplace other than Main Street what does that say about the picture of the economy that includes a bottom, middle and top. Main Street generally represents the middle sector-, for which the word of mouth consensus was that it was  the slowest retail season in memory. So if the facts reported in the Lepage budget are actually true, the top sector of the economy must have been doing really well because we know the bottom sector is not going to account for the discrepancy between what was happening on Main Street and the figures reported by Maine State Inc.

Individual Income Tax –The Individual Income Tax is forecast with the input of a number of economic variables: the components of personal income, inflation, total employment growth, the unemployment rate, and the 3-month treasury bill and 10-year treasury note rates. In addition to these economic variables, Maine Revenue Services must also input assumptions about net capital gains. For the most part the relationship and the effect of these variables on the individual income tax are obvious. Personal income and the distribution of that variable into its components (salaries and wages; dividends, interest and rent; proprietor’s income; and transfer payments) affect the accuracy of the Individual Income Tax forecast. The forecast for the Individual Income Tax while consistent with the changes in these economic variables is also influenced by recent data from federal and state income tax returns. The Individual Income Tax was over budget in fiscal year 2014, mostly due to higher than anticipated tax liability for tax year 2013. In their December 2014 report, the RFC recommends an increase in revenue through fiscal year 2017. 

The above paragraph is so convoluted that it comes across as trying to conceal something. What are we to make of a sentence such as "The Individual Income Tax was over budget in fiscal year 2014, mostly due to higher than anticipated tax liability for tax year 2013." If the corporation of Maine can report their "facts" about sales tax in a straight forward sentence such as " Sales and use tax receipts increased by 2.5% for the 12 months ending in September 2014",why can't it do the same for individual income tax revenue? The recommendation from the RFC is helpful " In their December 2014 report, the RFC recommends an increase in revenue through fiscal year 2017."- glad to hear  it from on high, that we should increase rather than decrease revenue through the fiscal year 2017. Its for advice like that that we pay government employees so well and provide them with special benefits!

 Corporate Income Tax – The Corporate Income Tax model is driven by employment growth by sector, the CPI forecast and a national forecast of corporate pre-tax profits. The RFC increased the forecast of Corporate Income tax revenue by $8.1 million for the 2016-2017 biennium. The new forecast reflects changes to the economic forecast for pre-tax corporate profits. Corporate profits are now estimated to grow slightly slower in calendar year 2014 but significantly stronger in calendar years 2015 and 2016. The forecast also accounts for several temporary state level tax law changes that will continue to have an impact on corporate income tax revenues in the next two biennia.

Its convenient that corporate income tax is driven by pre-tax profits when corporate welfare provides its targeted sector a tax free ride. When the public is covering a corporations payroll taxes and refunding capitalists their investments (Pine Tree Zone Tax Incentives Maine Technology Institute, Seed Capital Tax Credit) , it makes it a lot easier for the targeted sector to make a profit and a lot more difficult for everyone else- hinting once again that when it is stated that personal income has increased that it might be because for one sector it has dramatically increased, while for others it may have gone down but since we are talking about averages even if the bottom half of the economy is experiencing a decrease, if the increases in the upper crust are large enough, the average would reflect an increase. This paragraph says exactly nothing about revenue from corporate income taxes.

In a 2013 Congressional Committee Testimony given by Mr Douglas Ray, lobbyist for the DECD corporation (otherwise known as the Department of Economic and Community Development- but it is in fact a corporation),  Mr Ray gave figures for manufacturing jobs developed in Maine that worked out to an average pay of $114864.00 per year. Mr Douglas Ray also made a point that these were jobs created thanks to Pine Tree Zone tax incentives which provide capital up to 100% exemption from personal and corporate income tax and and up to 80% tax credit on corporate payroll taxes. The highest paid jobs mean the most expensive payroll taxes, largely passed on as a burden on the general taxpayer.  ( Currently when I  click on the testimony link in the link for the bill (above), the screen pops up for a second and then immediately goes to another page. You can try it yourself to see if you can actually read the testimony, but at the time I did my original research, the testimony link functioned in a normal manner. I did the math and mentioned the results in my timeline- and that is why I still have access to the results if not the testimony on which the results are based- and so unless you can get the testimony link to function normally, you will have to take my word for it)

Municipal Revenue Sharing – Sales and Use Tax, Service Provider Tax, Individual Income Tax and Corporate Income Tax are subject to Municipal Revenue Sharing in accordance with Title 30-A, section 5681 of the Maine Revised Statutes. That section of statute requires that an amount equal to 5.0% of the sales, income, corporate and service provider tax lines be transferred to the Local Government Fund (Municipal Revenue Sharing). For the 2016-2017 biennium, Revenue Sharing will be consistent with the level of funding provided in fiscal year 2014-15

I am not sure what is included in Service Provider Tax, since I did not see it listed- unless it means cigarettes and insurance, which I skipped but in a nutshell- cigarette tax revenue on the decline and insurance tax revenue said to have increased but was recorded as flat. As for the other categories, the only one in which there was any clear statement made was sales tax. The other two categories use many words to tell us very little but Municipal Revenue Sharing tells us that things are on par with the previous year, which means that if there was an increase in sales tax revenue there must have been a decrease in other categories- any one's guess which.

That completes this section- commentary to be continued.

Join The Discussion On Lepage's Tax Plan on The Maine Citizen http://goo.gl/4MKdJB