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Legislators make real strides on tax reform, energy

An expanded sales tax, a lower overall income tax rate and progress on efficiency all merit praise.

 

As I suggested last week, two significant pieces of legislation dominated the latter days of the legislative session in Augusta: tax reform and an omnibus energy bill.

Many of us had given up hope that meaningful legislation to reduce Maine's high income tax rate and broaden Maine's narrow sales tax base would ever garner enough votes to pass. Luckily for Maine, Rep. John Piotti, majority leader of the House, never gave up hope that such reform was possible.

Piotti, D-Unity, has been a leader in this effort through two sessions and several previous failed attempts. He worked tirelessly to craft legislation that would address both tax issues and have a chance of passing. Piotti was able to enlist the support of three influential business groups: the chambers of commerce of Portland, Bangor and Androscoggin County.

Even with all this, Gov. Baldacci nearly scuttled the entire effort at the last minute with what seemed to be a silly veto – coming back with changes that made little sense (i.e., dropping the sales tax on ski-lift tickets).

One might well ask where the governor had been in the months and weeks when this legislation was coming together. The governor's timing was good enough to get him prominent mention in a Wall Street Journal editorial. While the Journal got many of the details wrong, it was a nice boost for Maine from a most unlikely source.

In the end, a tax reform bill was passed that is historic, mostly as a first step toward a more reasonable tax structure in Maine.

It does not quite reduce Maine's real top income tax rate from 8.5 percent to 6.5 percent, as billed, because the governor raised the top rate to 6.85 percent and because the many current deductions have now been excluded.

Nonetheless, the state does finally have a broader base for the sales tax, making us less hostage to wild swings of the economy. We have given modest tax relief to Mainers, mainly by shifting some of the tax burden to out-of-state visitors.

The optics, at least, of the overall income tax rate moving from 8.5 percent to 6.85 percent are something – as the Wall Street Journal editorial attested. All in all, it was quite a feat for this state in this year. We should pass emergency legislation to exempt Piotti from term limits (he is termed out this year) and give him another go at this in the 125th Legislature.

Energy legislation was also the subject of much debate and interest. Part of the interest derived from the availability of federal stimulus funding, both for new technologies such as offshore wind power and for energy conservation efforts that focus on low-tech approaches to weatherization.

In a state such as Maine with a long winter and high dependence on oil, the payback is high on weatherization and like efforts to improve energy efficiency.

Part of the interest stemmed from imaginative approaches suggested by unlikely sources. Peter Vigue, the chairman of Cianbro Corp., put forward several proposals that the governor incorporated in his energy legislation.

Then there was a grass-roots effort by Opportunity Maine, which teamed with Rep. Seth Berry, D-Bowdoinham, to define a comprehensive energy-efficiency bill that would have made Maine the leading state in the nation in developing a green energy economy, complete with up-front financing, a cadre of new jobs and impressive payback numbers.

Clearly, energy was an area of substantial interest, even excitement.

The Joint Select Committee on Maine's Energy Future, co-chaired by Sen. Phil Bartlett, D-Gorham, and Rep. John Martin, D-Eagle Lake, took in all of these proposals and produced a comprehensive bill that embraces many of the elements proposed in earlier legislation.

Most significantly, it establishes an Efficiency Maine Trust to consolidate all energy-efficiency programs; to fund new efficiency efforts and work force training for new weatherization work; and to promote alternative energy resources programs in the state.

There is much more to this bill, which runs to 58 pages. It is somewhat more than a good start, but somewhat less than what many hoped for.

Beyond initial funding, mostly by two-year federal stimulus funds, no decisions have been made about how to make these efforts self-sustaining. The legislation also delays the electric transmission corridor initiative – a particularly promising idea. On energy, much remains to be sorted out.

The only significant disappointment in the session was the lack of real progress on the education front – but I'll say more on this in another column.

All in all, though, there is much to praise in the work of the Legislature this session. Leadership, in particular that of House Speaker Hannah Pingree, D-North Haven, deserves credit for a deft touch in the management of several major initiatives.