May 2006 Archives

by Jason A. Fortin

A recent ABC news story and a Sun Journal editorial indicate that “gotcha journalism,� reporting that relies more on newsroom imaginations rather than factual data, is alive and well even in the post Rathergate era.

“Gotcha journalism� by no means made its debut with Dan Rather and the fabricated story he propagated about President Bush’s National Guard service, and by no means has it died since the story. Two years have passed and it is a new election year, but it seems that the main stream media learned nothing from Rathergate and are up to their same old trickery.

In a recent report published by the Tax Foundation, the estimated tax compliance burden due to the federal income tax was $265.1 billion in 2005. Mainer's share of the compliance burden is $1.26 billion. This represents a whopping 29.7 percent of all federal income taxes collected in Maine--34 percent higher than the national average of 22.2 percent and the 15th highest percentage in the nation. More specifically, Maine individuals represent 44 percent ($558 million) of the tax compliance burden, businesses represent 52 percent ($650 million) and non-profits represent the remaining 4 percent ($47 million).

Uninsured motorists. That was a perennial issue during my years working in the Maine Legislature. At issue: a number of Mainers are driving illegally without auto insurance. If you’re involved in an auto accident with an uninsured Maine driver - you’re out of luck. They don’t have insurance to pay to have your car fixed. And woe to you if you’re hospitalized or incur medical bills.

This week's installment of the "Hidden/Fee of the Week" is up on the MHPC website--the aeronautical gasoline tax. Enjoy :-)

Yesterday, MHPC released a paper on Health Savings Accounts explaining what they are and why you may want to consider one for yourself or as a benefit provided by your employer. Read it and learn what HSAs can do for you.

Consider our story:

My wife Anna and I have had an HSA for two years. Our premiums for our HSA-eligible insurance plan have averaged $300 a month less than a traditional, low-deductible insurance plan (about $400 a month compared to over $700 a month). To date, we have saved over $8,700 in lower premiums in 29 months, deposited $9,500 into our HSA and used just $2,700 from the HSA to pay out-of-pocket health care expenses incurred during this time. Today, we have $6,800 in our HSA earning 2.5% interest each year. We now have more in our HSA than our entire deductible for our health insurance plan.

If we had traditional insurance, we would have spent all that money in premiums. Instead, we accumulated thousands in savings for ourselves - not for an insurance company.

Take a look at HSAs. Ignoring this option could cost you and your family thousands in missed savings.

By now we have all heard about the recently enacted Federal income tax cut officially called the "Tax Increase Prevention and Reconciliation Act of 2005." The Joint Committe on Taxation has estimated the tax cut at -$69 billion over the next 10 years. What you won't hear about is the $21.8 billion of "Revenue Offset Provisions" otherwise know as tax increases. Looking over these tax increases is not for the faint-at-heart as they are full of tax minutia that only a tax accountant could love. There are 13 of these tax increases including the "Application of earnings stripping rules to partners which are C Corporations ($284 million over ten years)" and "5-year amortization of geological and geophysical costs for major integrated oil companies ($189 million over ten years)." Huh? Anyone want to guess what these mean? As usual, the government gives with one hand and takes with the other. More disturbingly, many of these tax increase provisions result in the shifting of the tax burden from individuals to businesses thereby further reducing tax transparency.

by Jason A. Fortin

Recent primary election results from North Carolina and Pennsylvania indicate that there is a new pachyderm hunting season. Moderate Republicans are the target, and to date, they are not fairing well.

These moderates, popularly referred to as “RINOs� (Republican-in-name-only), are whom many grassroots activists blame for the recent decline in fiscal conservatism and small limited government philosophy by Republican elected officials.

As I mentioned in my first posting, tax transparency is a critical component of a good tax system. Without tax transparency, taxpayers have no way to judge whether or not the price of government is worth the benefits. Unfortunately, Maine's tax system is anything but transparent. Perhaps the largest obstacle to tax transparency is the sheer number of taxes that are "on the books." In order to shed light on this problem, MHPC created a section on the MHPC website that provide the details on a specific hidden tax or fee.

The goal is to highlight at least one new tax or fee per week and to keep a running count on the number of taxes we find. The count is important because not all taxes and fees are created equally--some are taxes and fees that are made up of a number of "smaller" taxes and fees. For example, the Special Fuel Tax is actully five taxes levied as Diesel, Propane, Methanol, Ethanol and Compressed Natural Gas taxes. As a result, the current count on the number of hidden taxes and fees stands at 6 (plus the gasoline tax highlighed last week). Stay tuned each week to discover the next "Hidden Tax or Fee."

by Tarren Bragdon

Dirigo Health – Recently the Dirigo Health Agency’s Board of Directors voted that Dirigo Health had saved Maine’s healthcare system $41.7 million dollars for 2006.

If approved by the Superintendent of Insurance, this $41.7 million will become the amount of the Savings Offset Payment (Dirigo Tax) beginning January 1, 2007. This 2007 SOP would produce a very similar 2.4% tax on all health claims that the Dirigo began imposing in 2006. This SOP would cost the average Maine adult with health insurance $70 a year or $200 a year for a Maine family.

Scott K Fish's intro entry on the MHPC blog....

Back Roads/Maine Places
by Scott K Fish

Heard the news? The Portland Press Herald is reporting a York County building boom. The Bangor Daily News is reporting no takers for the Georgia-Pacific Old Town mill and the Baldacci Administration is spending millions of tax dollars to destroy a Washington County railroad by turning it into a hiking/biking path.

That there are two Maine economies cannot be in doubt by any honest person traveling above the State Volvo Line - a straight line running from the Town of Upton on Maine’s western border, through the City of Bangor, and over to the Town of South Trescott on Maine’s eastern border. In practice, the Volvo Line (a term aptly coined by MHPC Advisor Prof. Jon Reisman) is an imaginary line separating urban and rural Maine.

I’m using the MHPC Blog to report on economic news above/below the Volvo Line. Why? To offer fresh views on stale economic policies in rural Maine and, in so doing, to uncover true solutions for rural Maine job creation/retention.

I live in rural Maine (Penobscot County, Town of Dixmont, Population 1,065) for almost 20 years. Also, I worked for the Maine Legislature (1989-2000) and saw how the two Maine's impacts the making of laws and government policies. I’d love to see a survey of how many Maine legislators have visited Bangor and points north in the last decade. Based on my experience, not many.

Rural Maine should not, need not, become a yuppie “experience� where rural Maine traditions are “preserved� as dioramas for flatlanders to stare at while touring a government-planned eco-corridor swept clean of rural life. Yet, I’m afraid that’s exactly where we’re heading.

So, I’m keeping my eyes-and-ears open and reporting here every Wednesday on back roads, Maine places.

I can be reached by email at sfish@mainepolicy.org

P.S. Some of the news links I use require free online registration. You should know that ahead of time.

by Jason A. Fortin

In our personal lives, the question of “how much is enough� is dictated by a simple parameter—our incomes. While building our personal budgets we are limited by how much money we make. And while there are instances that call for tapping into credit in order to pay for something above and beyond what our current income streams allow, such instances are limited because those expenditures force budget sacrifices in order to cover those debt payments. Budgeting is a very simple concept that we all live by—some better than others.

Among those individuals who fail to grasp the concept of budgeting are the very people we entrust to make decisions for us—our elected officials.

By: Bill Becker

On Thursday, the New England Economic Partnership , a nonprofit organization that issues economic forecasts twice a year, released its new forecast for the New England States.

The report addresses Maine specifically:" --Maine: While job growth is expected in Maine in 2006, the pace will be much slower than economists had forecast previously. Employment levels that the state had been forecast to reach this year will not be realized until 2009. Job growth through 2010 is forecast at an average 0.7 percent per year, slowest in New England. In recent years, job gains in sectors other than manufacturing had offset manufacturing job losses, but that trend has ended. And revisions to employment data now show that job growth that had been expected last year in Maine did not occur, and figures for 2004 have been revised downward."

The Associated Press examined the reports of the six New England States, and found that once again, Maine is among the weakest.

What does this mean for Maine?

By: J. Scott Moody

Welcome to The Maine Heritage's Policy Center's new blog. The goal of the MHPC blog is to provide timely commentary on important policy issues. In particular, this blog will help "fill in" the time between studies. This first blog is a great example of this. One of my major tasks this year is to develop a fundamental tax reform plan for Maine. Naturally, this is long process. However, along the way there are useful bits of information that can be passed along in the course of my research to the general public and policymakers. In this blog posting I will share with you the four critieria that I will use to judge Maine's tax system. Of course, the list is not set in stone and I encourage anyone who has any additions and/or subtractions to the list to please send me an email and I will evaluate them. The usual disclaimer applies to the MHPC blog in that all views are strictly the author's and not necessarily those of MHPC--unless it is a reprint of MHPC work such as a press release or study. Enjoy :-)

Principles of Tax Reform.
1. Be Transparent: Taxes are the price of government. Unfortunately, today there are so many different types of taxes; taxpayers struggle to determine what exactly the price of government is. Imagine walking into a store where every shopper faces a different price because of differences in income, age, occupation, where they live, etc. Taxpayers face such a bewildering dilemma both among and within the multitude of taxes they pay that; ultimately, the price of government becomes so obscured that taxpayers are simply unable to weigh the benefits vs. the cost of government. A good tax system is designed to allow the taxpayer to easily determine the price of government.
2. Be Neutral: Paying taxes is an involuntary action and push taxpayers to alter their behavior to minimize their tax bill--taxing income reduces income, taxing retail sales reduces sales, taxing the value of property reduces its value. A good tax system is designed to reduce the influence of taxes on the behavior of taxpayers by taxing at a single point in the economy (income OR consumption OR wealth), having tax a single, flat rate and having a tax base that is broad (no exemptions, allowances or credits).
3. Be Simple: In addition to paying the tax, taxpayers must also spend time and money planning, complying and filing their taxes. This leaves less time and money for family and business. A good tax system is designed to minimize these tax costs on the taxpayer.
4. Be Stable: Taxpayers make many long-term decisions in the face of an uncertain world such as the decision to have children or to to buy a house. A good tax system should not be a source of additional uncertainty by changing continuously, by enacting temporary tax changes and, worst of all, by making tax changes retroactive.