A report by the conservative Maine Heritage Policy Center warns that approving Question 2, the income tax surcharge for K-12 education, would worsen inequality among Maine schools and cost the state thousands of jobs.
The report, released Tuesday at a Maine State House news conference, predicts several negative economic consequences for Maine if voters back the statewide November ballot initiative. They include an unbalanced education system in which rich districts would benefit far more than poor ones, an exodus of high-income residents from Maine and a corresponding loss of consumer spending, tax revenue and jobs.
The ballot issue proposes a new tax on Maine households earning more than $200,000 a year – $30 for every $1,000 earned above the $200,000 mark. The money, estimated to generate $157 million the first year, would be earmarked for “direct support” of student learning and administered by state education officials.
Maine’s top tax rate, which would be assessed only on income above $200,000, would become the second-highest in the nation after California if voters approve the measure.
In a strong split along party lines, about 60 percent of Mainers favor taxing personal income over $200,000 to pay for education, according to a Portland Press Herald poll conducted in September.
But opponents who spoke Tuesday, including conservative and business leaders, said passage of the measure would have unintended consequences, especially for small businesses.
“Not only is it bad policy, but it is actually destructive to the state,” said Policy Center CEO Matthew Gagnon.
The Question 2 opponents noted that the income tax surcharge also would apply to thousands of small businesses in Maine whose revenues are taxed under the same rules as personal income tax. The report estimates that nearly 11,500 businesses taxed as “pass-through entities” would be subject to the state’s new marginal tax rate of 10.15 percent on revenue above $200,000.
The highest marginal tax rate for corporations in Maine is only 8.9 percent, they said, which means large companies would end up getting a better deal than small family businesses if Question 2 is approved.
“It’s taxing small businesses in Maine at a larger rate than we tax large corporations,” said David Clough, Maine state director of the National Federation of Independent Business.
However, John Kosinski, a lobbyist for the state teachers union and the campaign manager for Yes on 2, said the 11,500 businesses cited in the MHPC study represent only 4 percent of the small businesses in the state, according to statistics from the Maine Center for Economic Policy.
“Question 2 is endorsed by the Maine Small Business Coalition and over 100 small business owners across the state because they realize great schools will result in great communities,” Kosinski said in an email Tuesday night.
Supporters of the ballot measure have said that Maine schools need more funding to counter the loss of programs such as industrial technology classes at the middle school level, an increasing number of pay-to-play athletic programs, outdated textbooks and materials, and larger class sizes. They believe levying a 3 percent surcharge on the wealthiest Mainers is the best way to generate that needed cash.
“Our concern is that this does not serve education in the ways put forth,” said Dana Connors, president of the Maine State Chamber of Commerce. “It will definitely hurt Maine’s economy.”
J. Craig Anderson can be contacted at 791-6390 or at:
Twitter: @jcraiganderson
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