A report released today by The Maine Heritage Policy Center (MHPC) shows that raising taxes to address the estimated $121 million dollar DHHS budget gap for this year would lead to the loss of more than 6,400 Maine jobs. As lawmakers work to decide how to fix the structural problems that have led to this massive shortfall, ultimately they will have to decide whether to decrease spending or increase taxes. The MHPC report indicates that a tax increase of this magnitude would cost Maine taxpayers $631 in lost personal income per household, or a total of 6,463 private sector jobs.
“Raising taxes to temporarily smooth over this problem would be a critical mistake,” said the author of the report, MHPC Chief Economist Scott Moody. “Maine’s private sector is already in a precarious situation, and we can’t afford to make it even more difficult for Maine’s families and businesses to get by in these tough times. A better solution is to address the structural budget problems that have led to this deficit and reduce government spending going forward.”
The report explains that the cost of a tax increase goes far beyond the initial price tag, showing that a $121 million dollar tax increase would ultimately remove $351 million in personal income from the Maine economy, a net cost nearly three times larger than the initial tax increase. The additional tax burden would further shrink the private sector in Maine, where private sector share of personal income is already at an abysmal 64.1 percent, ranking us at 39th in the country.
“Taking more money out of the private sector and funneling it to government will further damage our economy,” said Moody. “What we need in Maine to turn the economy in a positive direction is investment from our businesses and entrepreneurs. New taxes will keep people from investing and keep new jobs, the very thing we need most of all, from being created.”
“Decades of increased welfare spending have put us in this position, and we can no longer afford the tax-and-spend ways of the past,” said MHPC CEO Lance Dutson. “Progressive special interests and the welfare industry want to raise taxes on hard-working Mainers to protect their revenue streams, even if it means lost private sector jobs. Raising taxes is the last thing Maine can afford to do right now. Instead, we should focus on fixing the structural problems with the DHHS budget and reducing government spending to get us headed in the right direction.”