July 2006 Archives

Another very useful source of data that I could have included in my sales tax paper comes from the "Maine Tax Incidence Study" published by the Maine Revenue Service. In terms of sales tax pyramiding, MRS estimates that 32.1 percent of sales tax collections are derived from business-to-business transactions. This is nearly the exact same percentage found by the COST study cited in my sales tax paper. This additional information again points out that sales tax pyramiding is a major problem of the sales tax and makes it very economically destructive--reducing income and jobs for all Mainers.

In addition, the MRS study finds that only 7.7 percent of the sales tax is paid by non-residents. This deflates the myth that the sales tax is primarily paid by "people from away" who vacation in Maine.

The Hidden Tax/Fee counter has taken a large leap upward with the addition of 247 environmental protection fees. The toal now stands at 260.

This excerpt is from the May 2006 Maine Economic Outlook published by the New England Economic Partnership and authored by Dr. Charles S. Colgan--Prefessor of Public Policy and Manegement, Muskie School of Public Service, University of Southern Maine.

A recent Wall Street Journal/Harris poll of 2,300 adults reveals that more Americans support higher health insurance premiums or copays for individuals with unhealthy lifestyles. A majority (53%) think is would be fair that “people who have healthy lifestyles, don't smoke, exercise frequently and control their weight tend to incur fewer health care costs than people with unhealthy lifestyles� and, therefore, should payer lower premiums or copays. Less than a third (32%) disagreed.

Just three years ago, the findings were almost reverse (37% thought it would be fair and 46% said unfair).

Such health insurance plans that reward healthy lifestyles are available in other states, as discussed previously, but not allowed in Maine. Maine policymakers should take these findings to heart as they consider reforms to Maine’s health insurance laws to provide more affordable options for Maine families and to encourage more people to live healthier lifestyles.

For those advocating a government-run healthcare system, the survey held bad news. Interesting, only 28% of adults agreed with the statement: “If the only way to make sure that everyone can get the health care services they need is to have a substantial increase in taxes, we should do it.� The rest disagreed (42%) or were not sure (29%).

Here at MHPC, we examine state and local tax collections as a percent of personal income as the benchmark for determing Maine's level of taxation on the overall economy.

However, there are other methods for measuring the level of taxation. A recent report by the New England Public Policy Center at the Federal Reserve Bank of Boston examines several alternative methods.

For Maine, the critical insight from this report is that Maine has a high level of taxation no matter which way you "slice and dice" the data. Below I have listed the results for Maine (the rankings in this report includes DC so rankings go from 1 to 51).

Total state and local tax burden, FY 2004:
as a share of personal income--4th highest.
as a share of total taxable resources (CY 2003)--2nd highest.
as a share of gross state product--1st hightest.

Total state and lcoal own-source revenue burden, FY 2004:
as a share of personal income--8th highest.
as a share of taxable resources (CY 2003)--3rd highest.
as a share of gross state product--3rd highest.

The Wall Street Journal this weekend ran a story titled "In New England, a Different Kind of Fall." The story is primarily about the cooling housing market and its short-term negative impact. However, over the longer term, the housing outlook is even gloomier. Why? The long-term shifting of population out of New England. The article states: "Meanwhile, the pool of potential home-buyers in the regions is 'falling like a stone,' says New Hampshire-based demographer Peter Francese. He cites U.S. Census Bureau data showing almost 200,000 residents between 25 and 44 years of age left the region between 2000 and 2004. All six New England show declines in that category, with Maine, Vermont, and Connecticut far outpacing the national average."

Comments/ Questions: Email J. Scott Moody

Innovation in health insurance products is occuring across the county. Recently, Blue Care Network of Michigan announced a new program to encourage employees to live healthier lifestyles. If employees commit to a healthy lifestyle, are already in good health or begin taking steps toward improved health, then they can earn a 10% discount on premiums and lower deductibles and copays.

Here's how it works: Points are given for favorable results or behaviors in six categories: alcohol use, blood pressure, blood sugar, cholesterol, smoking status and weight. Twenty-five points for not smoking. Fifteen points for positive results in most other categories. These six categories were selected because they are the leading causes of chronic illness and costs which can be controlled. A point total of 80 or more qualifies a person for the discount. The primary care physician will develop an individualized care plan as necessary to help those scoring below 80 work to improve their score over time (and get the discount).

All members also will have access to free smoking cessation and weight loss programs, and free programs that focus on health education and assist with chronic illness. In addition, experienced health coaches will work with members on an individual basis.

Now, employees will have even more incentives to focus on good health.

Sadly, Maine's insurance regulations do not allow such health insurance product innovations here. Maine policymakers could learn from the Wolverine State and allow more affordable, innovative health plans to be sold to Maine businesses and families.

Here is a preview of an upcoming MHPC study examining the growth in real per capita personal income in Maine versus the national average.

UnitedHealth Group just released a three-year study comparing 40,000 individuals with Consumer-Driven Healthcare Plans (CDHPs, like those with Health Savings Accounts), compared to 15,000 with traditional health insurance (PPO, preferred provider organizations).

Major Findings:

# Preventive Care – each year, 5 percent more of the CDHP members sought preventive care services than did traditional insurance enrollees.
# Acute Care – CDHP members had a reduced use of acute care services (22 percent fewer hospital admissions and 14 percent fewer emergency room visits) without adverse health effects or outcomes, while the relative utilization of those acute services increased among traditional insurance members.
# Chronically Ill – CDHP members with a chronic illness also used acute services less (8 percent fewer hospital admissions and 12 percent fewer emergency room visits) but continued to visit their primary care physician at the same rate as chronically ill members enrolled in traditional plans.
# Overall Costs – Costs per member decreased 3 percent to 5 percent for CDHP enrollees over the 2004-2005 period, as compared to their 2003 baseline level, while increasing 8 percent to 10 percent among traditional insurance participants (after adjusting for demographics, health status, plan design impact and geography).

In another UnitedHealth Group study of 130,000 individuals with Health Savings Accounts (HSAs):

# After one year, the average HSA account holder had $1,100 in their HSA.
# 60 percent of employers provide funding to their employees' HSAs, and on average employers are funding 40 percent of the employees' health insurance policy deductibles (in addition to paying part of the premium). For example, if the HSA insurance plan has a $2,000 deductible, the employer is contributing $800 to the HSA.
# Nearly 90 percent of employees open a HSA if their employer offers to contribute funding.

Both Anthem and Aetna offer HSA-eligible insurance plans in Maine. Recently, MHPC released a report on HSAs and what they mean to Maine people.

By Bill Becker

Why is it that most of the rest of the nation (with the exception of New Jersey) understands that tax cuts create growth in the economy and jobs as well?

The Wall Street Journal reported today that Rhode Island, Oklahoma, New Mexico, and Arizona - all states that have Democrat Governors or where Democrats control a majority of the Legislature - have aggressively cut their tax rates and tax burdens on taxpayers in those states.

And Maine?

A recent Wall Street Journal article titled “Florida Snowbirds Challenge Fairness of Two-Tier Tax� (May 22, 2006) sheds light on a unique feature of Florida’s property tax system. In Florida, full-time residents are given preferential tax property tax reductions while seasonal residents are not. This has led to a growing disparity in property tax bills between the two groups.

There are two property tax reduction mechanisms at work. First, Florida has a homestead exemption worth $25,000. The exemption reduces the homeowner’s assessed value by $25,000. Second, a constitutional cap mandates that assessed values can grow by no more than the lesser of 3 percent or the rate of inflation. These property tax reductions can only be used on the primary homes of permanent residents.

This begs the question—is this good tax policy? Lets compare this to the four principles of a good tax system: transparency, neutrality, simplicity and stability.