Making connections
Tax reform seen as huge business boost
- Lower income tax expected to trigger investment
- Revisions sought for new equipment accounting
Gov. Paul LePage’s proposals to cut taxes in the next two years will “jump start” job creation more than regulatory reform, say business leaders.
“Regulatory reform goes to a few companies,” said Chris Hall, vice president of the Portland Regional Chamber of Commerce. “Tax reductions go to every company, so I think tax reductions are more important.”
He said cutting taxes overall by $203 million will mean many businesses will have more cash to invest in job creation.
“While everybody will benefit from lower income taxes,” Hall said, “small businesses pay state income taxes through their personal returns, so anything that reduces those costs goes to the small business [owner] who then can reinvest in their company.”
He said in addition to the tax-rate reduction, changes in depreciating or expensing new equipment will also help spur investment and expansion.
“This is just hugely important for Maine businesses and even more so for small business,” said David Clough, Maine director of the National Federation of Independent Businesses. “Lowering the tax rate is very important when so many small businesses are taxed by the tax on their owners.”
Finance Commissioner Sawin Millett said the budget proposes lowering the top personal income from 8.5% to 7.95%. He said that was an important part of Governor LePage’s effort to improve the business climate, as is revising the state law regarding the accounting of new business equipment.
Federal income tax law allows a company to write off the cost of new equipment and machinery in the same year it is purchased instead of depreciating the cost over a period of years. State law currently allows only $25,000 a year to be claimed under that provision.
The budget proposal would match the federal limits for 2011 and 2012, which are $500,000 this year and $125,000 in 2012 for expensing and bonus depreciation.
The jobs and skills mismatch
- Workers ill prepared for available jobs
- New data considered by educators
A new computer tool being finalized by the Maine Department of Labor will match worker skills with job openings across the state, but it also is expected to show the huge gap between the current job skills of Mainers and those needed by employment sectors in the state.
Using the new program, acting Commissioner of Labor John Dorrer found more than 3,000 unemployed workers getting unemployment benefits who had job skills identified for only 300 jobs statewide.
“We had about 4,500 health care professional and technical occupations posted on the Internet with about 600 workers on file with those kinds of skill sets,” he said. “It is a dramatic mismatch.”
Dorrer said the mismatch between job openings and workers’ skills is not new, but the computer tool shows the disparity based on actual job openings, not projections. He said the analysis also indicates it is becoming more difficult to provide new skills a worker may need to find a job after losing his or her job.
“The skills needed often take longer to obtain than the duration of a person’s unemployment benefits,” he said. “We need to look at how we are going to provide the training and education needed for the new jobs that are out there, many waiting to be filled.”
Dorrer said many jobs demand significant retraining or a college degree. He said while workers need to invest in themselves, government needs to help and public colleges and universities need to provide opportunities that are not currently available.
University of Maine System Chancellor Richard Pattenaude said the system is working with community colleges and DOL to identify what new programs are needed, and what existing programs need expanding. He said tough decisions are already being made over termination of academic programs that no longer attract enough students to warrant their cost.
“We have created the 12-5 rule that is directly aimed at this,” he said. Any course with fewer than a dozen students is reviewed to see if it is needed, and any program that graduates fewer than five students a year. He said over a million dollars has been saved in the first round of reviews.
Chris Hall, vice president of the Greater Portland Regional Chamber of Commerce, said detailed data “is hugely important. Work-force needs dominate many different workplaces and folks aren’t sure where their next set of workers are coming from. To have information that connects them to well-trained workers is hugely powerful.”
Lawmakers considering emergency UI help
- Federal compliance language urged
- Employment safety net threatened
More than 7,000 Mainers will lose their unemployment benefits in March if lawmakers do not approve a change in state law to comply with federal unemployment insurance law changes made in December.
“If we do not comply with the federal language, we will lose coverage of more than 7,000 Mainers who really need this help,” said Sen. Chris Rector, R-Thomaston, co-chair of the Labor, Commerce, Research and Economic Development committee. “I hope we move this through swiftly.”
He said the legislation had broad support in the committee, and he believes it will have the two-thirds vote of the House and Senate prior to the March 11 deadline.
“This has been an important program for us over the last couple of years,” said Laura Boyette, director of the Unemployment Bureau at the Department of Labor. “The Maine Legislature took action in the spring of 2009 to adopt a temporary trigger to make sure this program took effect in a time of high unemployment.”
She said the program is a lifeline for workers who have exhausted both their 26 weeks of state-funded regular benefits and federal emergency benefits. She characterized those qualifying for the program, funded primarily through the federal government as “pretty desperate” and still looking for work with few jobs available.
The legislation drew broad support at a recent public hearing. Matt Schlobohm of the Maine AFL-CIO told lawmakers the recession is far from over for many Maine families even though unemployment rates are down.
“It will help thousands of workers in our state,” he said. “It will strengthen Maine’s economy and it will keep bread and milk on people’s tables and a warm house to go home to.”
Boyette estimated the value of continuing the extended benefit program at close to $20 million through the end of the year.
In 2010, the standard state unemployment benefits paid to workers was about $210 million. The federally funded emergency and extended programs are estimated to have provided another $213 million to the state’s economy.
Mal Leary runs Capitol News Service in Augusta. He can be reached at editorial@mainebiz.biz. Read more of Mal’s columns here.
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