Taxation: September 2009 Archives

Today Maine's Department of Labor released new  unemployment data for August, 2009.  It contains some good news and bad news. 

First, the good news.  As I blogged on earlier, Maine's labor force has been shrinking and had set an unprecedented record of six consecutive months of decline.  That record will not get worse as the labor force grew slightly by 678 people.  Although this is a small number and we still have to  hope it does not get revised away in the future.

The higher labor force also means fewer "shadow unemployment" folks which left the modified unemployment rate at 9.8 percent (click "continue reading" to view chart).

However, the bad news is that the ranks of the unemployed grew by 792 people.  As a result, the unemployment rate rose to 8.6 percent from 8.5 percent.

The Welcome Back Tax (described here) will hurt Maine's business climate by increasing the cost to business of finding new workers and new investment.

First, the cost of finding new workers will rise because in order to attract talent "from away" Maine businesses will have to absorb some, if not all, of the Welcome Back Tax.  In a perfect world, Maine's businesses would be able to find all the skilled workers they need right here in Maine.  Unfortunately, they cannot.  As a result, this tax will put Maine businesses at a disadvantage when seeking out-of-state workers to bring to Maine.

Second, the cost of finding businesses and/or investors "from away" will also become more problematic.  A business seeking to expand in Maine will find their rate of return reduced for their non-resident owners.  A lower rate of return will force many businesses who would otherwise locate in Maine to look for greener pastures.

In the end, the Welcome Back Tax will mean fewer businesses and fewer jobs for all Mainers.

My new study was released today showing that over the last decade state government spending has soared by $2 billion--an whopping increase of 45 percent.  As a result of this runaway spending, Maine's government payrolls have expanded by 3,400 workers while the private sector has lost 13,000 jobs.  To put it another way, for every new government job, the private sector lost 4 jobs.  The job loss is so severe that there are now fewer Mainers employed in the private sector than a decade ago.