2013-09-06 / Columns

Politics & other Mistakes

Freedom ain’t free
By Al Diamon

I never knew the Maine Heritage Policy Center was such a fan of former Democratic Gov. John Baldacci. Until recently, the right-wing think tank had appeared unrelentingly critical of Baldacci’s policies.

And not without reason. Baldacci floundered through eight years in office, from 2003 to 2011, consolidating local school districts (a massive failure that was never properly funded and failed to produce the promised savings), consolidating county jails (a massive failure that was never properly funded and failed to produce the promised savings) and expanding health care (a massive failure that … well, you get the idea).

Give Baldacci points for consistency. But from a practical standpoint, nearly all his initiatives were poorly planned and ineptly executed.

Yet, here’s the ex-governor’s face all over the center’s website above quotes from him extolling the virtues of his Pine Tree Development Zones.

“I’m very proud about this program and what its impact has been,” Baldacci said in 2010. “It levels the playing field in Maine. It’s not about taxes, it’s not about regulations – it’s about being able to compete in the global marketplace. We’re definitely putting the neon sign out there that says, ‘Maine is open for business.’”

The zones – which now cover most of the state, although they were supposed to be limited to areas of high unemployment – offer businesses that locate there lower taxes and reduced energy costs. Several studies of their effectiveness have been conducted over the years, all showing that these breaks cost the state millions in revenue for results that can’t be quantified. A 2012 investigation by the Maine Center for Public Interest Reporting showed “a pattern of doubts raised, studies commissioned, more doubts raised and recommendations rarely followed.”

In other words, it’s the perfect model for the policy center’s latest plan to boost the state’s economy. It’s called “Free ME,” and it bears only a passing resemblance to Baldacci’s iffy zones. But by linking the two ideas together, the MHPC is attempting to convince us that its radical tax-cutting scheme has bipartisan support.

The center seems to be saying that this isn’t some crackpot delusion cooked up by a bunch of antigovernment kooks. Instead, it’s a crackpot delusion cooked up by a bunch of antigovernment kooks and seemingly endorsed by one colossally ineffective Democrat.

Here’s how “Free ME” would work. The state would get rid of all major taxes in its poorest county, which is currently Washington. Residents would pay no income or sales taxes. Businesses would pay no corporate tax. As a result, people would have more to spend and companies would have a major incentive for expanding or relocating to that impoverished area.

That would “turbo-charge” the economy, according to the center’s website. “The economic growth and prosperity that follow will more than make up for the ‘lost’ revenue to government.”

Maybe. But here’s a problem. Much of that turbocharging would almost certainly come at the expense of the surrounding area. Why would residents of Aroostook, Hancock or Penobscot counties shop locally for major purchases, when they could drive a few miles and get those items tax-free? The revenue loss to the state could be many times the meager amount now extracted from Washington County. And parts of Maine that are doing only slightly better than that place would be dragged down by the loss of business.

No problem, says the policy center, because once Washington has experienced three years of relative prosperity, all companies located there would have to start paying a new “consumption-based” tax similar to New Hampshire’s Business Enterprise Tax, which is a complicated levy on payrolls, gross income and interest paid and earned. While the center claims this form of taxation has worked well in the Granite State, it neglects to mention that the amount it raises isn’t sufficient to pay for many public services, which is why New Hampshire has the third highest property-tax burden in the nation.

Once Washington County is on its feet, “Free ME” would move on to the next poorest county, Aroostook, which will be even poorer by then because of all the business it lost to Washington. But with statewide taxes lifted, Maine’s largest county would soon be sucking the lifeblood out of its neighbors, such as Piscataquis County (with the worst average compensation per job in the state and the fifth worst personal income per capita) and Somerset County (with the second highest percentage of people in poverty).

Eventually, the entire state, except prosperous Cumberland and York counties, would come under the “Free ME” rules. That’ll allow the rest of Maine to steal most of their revenue, thereby reducing them to the destitute condition that will be the new normal.

We’ll all be equally poor.

Even John Baldacci couldn’t accomplish that. Although, he came close.

You are now free to move about your keyboard, and email me at aldiamon@herniahill.net.

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