The Smart Money: Corporate welfare

Posted Tuesday, February 17, 2015 in Analysis

The Smart Money: Corporate welfare

by Gina Hamilton

Governor Paul LePage is opposed to welfare, he says, and proves it every day by asking the U.S. Supreme Court to decide whether it's OK to pitch young people off Medicaid, cutting general assistance to legal immigrants, and trying to eliminate revenue sharing to the towns.

But there is one form of welfare that LePage apparently doesn't mind.

Corporate welfare.

Corporations currently pay anywhere between 3.5 percent for incomes up to $25,000 to 8.93 percent for incomes above $250,000. Like any good progressive tax, it is graduated and affects those who can pay more than those who can't.

But LePage is hurting because after four years in office, Maine is still at the bottom of the heap in terms of job creation, and all the other corporate welfare LePage has tried doesn't seem to be helping.

That could well be because LePage isn't looking at the right stuff. When businesses choose not to settle in Maine, after being wooed, they are asked why, and the most important things they say are:

1. The outrageous price of energy.

2. A workforce that doesn't have the appropriate education for their needs.

3. Poor infrastructure, including the lack of high-speed internet and mobile phone connectivity, transportation, including rail lines, ports, and airports, as well as poorly maintained roads and bridges.

4. The high cost of health care.

Way, way, way down at the bottom of the list are issues like "too much red tape" and "high taxes", but it is much easier to seize on things like this that fit with the Republican narrative than the other things, that might actually cost the state something real, like putting more money into higher education or fixing roads, bridges, and adding high-speed internet everywhere. 

And so, voila, we had the red tape express in the first term, and unpaid-for tax cuts in the second.

LePage wants to flatten corporate taxes so that all but the very lowest tax bracket would be the same, and the rate for corporations earning more than $25,000 would fall to 6.75 percent by 2021. This is less than the middle class would pay in income tax for many years. And it doesn't matter whether the corporation is earning $26,000 or $2.6 million, the flat rate would be the same.

What LePage doesn't want folks to remember is that he has the authority right now to offer a corporate tax break to anyone he is pursuing for jobs in Maine. He could have offered a massive tax break to an aeronautical company that was considering bringing hundreds of jobs to the Brunswick area; he declined, leaving it to the nonprofit CEI to offer interest-free loans to the company, and reneging on some of those. Not surprisingly, the company found a better deal elsewhere.

In the end, attracting and keeping good paying jobs is going to be a function of many things; a mindless tax cut is not the only thing that will matter.

Corporations are looking for a little less uncertainty with regard to the cost of energy, a workforce that returns to Maine after their college careers elsewhere, or one that isn't driven away from Maine by high college costs coupled with very low wages. They want good infrastructure; it makes little sense for them to build a quality product if they can't ship it to the markets who are clamoring for it. Corporations are looking for sensible and predictable regulations, not the wild west, and they are looking for reasonable health care costs for their employees. If they could have these things and found themselves paying a little extra in tax for these things, they'd be fine with that.

The problem is that every time we lower taxes on corporations or individuals, the things corporations say they're looking for -- better education, better infrastructure, cheaper health care and energy -- take an almost immediate hit.

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