Taxed enough already?

Taxed enough already? If you are a working family, yes! And we are taxed on the wrong things.
In our last letter we noted that the governor’s budget recommendation would (ultimately) kill all income taxes. This might save the average working family about $200 per year, while saving the average family earning $500,000 per year about $35,000 each year. This would knock a huge $1.7 billion hole in the budget — likely filled by raising sales and other regressive taxes and cutting services that benefit working families.
We left the last letter with the question as to why any government that claims to serve the needs of its constituents would do such a thing.
The assumption most voters make is that the government is there to serve “the people.” We assume that means the vast majority of us who are working families (or retired people, or children, or as we Christians who read Matthew 25:35-45 would believe, “the least of these.”)
But I wonder who that government really serves …
The tax-cutting crowd typically makes three arguments to justify cuts. First, they say, tax cuts benefit everyone. How does that work out? As above, working families get $200, while rich families get $35,000 (and working families get deep cuts to vital services that rich people usually don’t need.)
The second argument is that cuts, even if they do mostly benefit corporations and rich people, free up money for them to invest in good jobs for working people. We’ve heard this one for 40 years — ever since 1980. Back then, the top Federal Income tax rate was 70 percent and the top State income tax rate was 10 percent. Thanks to incessant neo-liberal pressure, today the top Federal rate is 39.5 percent and the top State income rate is 6.75 percent — resulting in massive tax cuts at the upper end.
So, how has that benefited working families? If you work for a living you know the answer to that. These massive cuts have most likely not freed up more money for good jobs for workers. It certainly hasn’t made working families any better off. Real wages for working families have not risen at all since 1980. So, while lots of money was freed up, do we have to ask where it all went?
The third argument that we hear is that having higher state taxes merely drives rich people away (and remember, the argument is that rich people create jobs, so we don’t want to see them leave). As we know, the voters just passed a referendum imposing a 3 percent increase on incomes over $200,000. (Yes, this would make the top rate in Maine the highest in the country — but nowhere near historical state income tax rates).
Last Friday an opinion piece in the Bangor Daily News pointed to a very nice man who has done well for himself (good for him!) who is forced to leave his beloved birth state of Maine because the taxes are two high.
Let’s consider what this might mean. While the piece didn’t mention the taxable income for this citizen, let us assume that it was $300,000 per year. On that, he would have to pay an extra 3 percent on $100,000, or something like $3,000. I don’t know about you, but I just can’t work up too much sympathy for someone making that kind of money who has to move because an extra $3,000 will break him.
States do compete with each other to lower taxes on wealthy people (and corporations) to lure them to live or do business there. This is called a race to the bottom. What happens when we reach the very bottom? (In Alabama when someone complains that the state ranks second to last in schools, roads, medical care, etc. they have a wonderful saying, “Thank God for Mississippi.”) Is that what we want?
So, if this insane neo-liberal mania for cutting taxes hasn’t delivered benefits to working families over the past 40 years, what might work? More on that later. As always, your thoughts are welcome. I am at chrism@roadrunner.com
Chris Maas
Dover-Foxcroft