State expectations
Tax amnesty misses projections
- Program falls $2M short
- Lawmakers warn of overdoing approach
The state’s tax amnesty program that ended Nov. 30 brought in $8.1 million, nearly $2 million shy of the $10 million budget officials predicted.
“The goal was to try and clean up some of the debts that are owed the state,” said Jerome Gerard, acting executive director of Maine Revenue Services. “It did not work as well as we had hoped.”
The 2010 Tax Receivables Reduction Initiative was aimed at both relatively recent tax bills owed the state and much older bills. Those owing the state tax debts fewer than five years old got 95% of the penalties waived for paying up during the program. Those with debts more than five years old got both 95% of the penalties and 95% of the interest due waived.
The program was aimed at the growing amount of uncollected taxes during the recession. At its highest level, unpaid taxes owed the state hit $276 million. Gerard said one amnesty payment from a single business, which he declined to identify, accounted for nearly a quarter of the total funds raised by the program.
The plan was put in the budget last spring over the objections of some taxation committee members who felt it was too soon to implement another tax amnesty program after a similar amnesty in 2009. Sen. Richard Rosen, R-Bucksport, co-chair of the appropriations committee, said the $10 million the program was expected to garner was part of an effort made last spring to cobble together a budget without tax increases. “We have to be very careful not to over utilize that approach,” he said. “If you go back to that well too many times, it just won’t produce.”
Last year’s tax amnesty program brought in $16.2 million, well above the $9 million projected. In 2003, a similar program brought in $37.6 million, well above the $19 million estimate.
LePage: Pay laws limiting Cabinet picks
- Top candidates turned off by salaries
- LePage taking 70% cut from Marden’s pay
Governor-elect Paul LePage says he hopes to have his Cabinet named by the end of the year, but acknowledges state pay laws limiting compensation have cost him some of his first choices.
“You try to get as much money as you possibly can for them, and if that is not enough, you have to go to number two, three and down the list,” he said, acknowledging that it’s happened more than once as he seeks to attract the “best and brightest” to serve in his administration.“I will emphatically say it is adversely affecting our ability to get the best people,” LePage said.
Top candidates for the commissioners’ roles at the departments of Health and Human Services and Education turned down the job because of the salaries offered, LePage said. Together, the two departments handle more than 80% of state spending.
And it’s not only the private sector that pays more than Maine state government, but other state governments as well, LePage says he realized while searching nationwide to fill some Cabinet positions. “Not everyone can afford to take a 70% cut in pay to serve their state,” he said. LePage is taking a 70% cut from his salary as CEO at Marden’s, as the governor’s salary is set in state law at $70,000.
Commissioners can earn more than the governor, with salaries set in ranges by law. Most commissioners are in a pay range of $76,190 a year to $109,990 a year. The DHHS commissioner has the highest salary range, with a minimum of $97,323 to a maximum annual salary of $134,139. Median household income in Maine is $46,419, according to U.S. Census figures.
That LePage is having trouble convincing potential commissioners to join his administration is not a surprise to Senate President Kevin Raye, R-Perry. He said while most state workers are paid well compared to their private-sector counterparts, the top level executive posts are not. “He has to, any governor has to, find people to serve because they want to serve the state, not because of the salary they will receive,” he said.
Many private companies pay far more for executives than the state pays for comparable positions, Raye said, quickly adding that does not mean he supports bringing state executive salaries in line with the private sector.“ Generally, the people that are drawn to public service are drawn by ideals other than salary,” he said. “I think there has to be a happy medium.”
House Minority Leader Emily Cain, D-Orono, said other governors have faced similar challenges. “Pay levels in the state of Maine are always held up to scrutiny and to criticism because the median income in our state is low,” she said. “People have concerns if the people they are paying are making salaries they think are too high.”
State revenues holding
- Additional $111M expected
- Individual, corporate income taxes up
State revenues in November came in just about on target, but even after several months of revenues meeting or exceeding projections, concerns linger about a shortfall as energy prices continue to rise.
“This is a time when a lot of Maine families are making their first [heating tank] fill-up or making their second; energy prices are rising,” said Mike Allen, research director for Maine Revenue Services. “That hurts a lot of low- and middle-income Maine families.”
Rising energy costs have had an impact on sales tax revenues in the past, as residents use discretionary income to pay higher energy bills, he said. The tax amnesty program also may have shifted some revenues to earlier in the budget year than normal, Allen said. “But for the most part, the revenues in November were just about what we expected in the new forecast that was made,” he said. “We are continuing to see income taxes doing well.” Both individual and corporate income taxes were re-projected to increase for the budget year for an additional $111 million by the end of the fiscal year June 30.
“That is very good news,” said Rep. Patrick Flood, R-Winthrop, the House co-chair of the appropriations committee. “I am particularly pleased about the consistency in the revenue improvement we have seen for the last few months in the categories of individual and corporate income taxes. What that tells me is that some individuals and some companies are doing better.”
But while revenues show improvement, they’re still at levels below those of two years ago. Building supply sales taxes reported in November from sales in October totaled $176,651, well below 2008 sales of $219,877. Overall, 2010 sales taxes for October were $1.324 million, below the $1.354 million in 2008.“It will take us a while to recover back to where we were two years ago,” Allen said.
The tax cut extension legislation signed by President Obama in mid-December was assumed in the economic forecast used to project revenues, but the reduction in Social Security taxes for 2011 will have an unanticipated and positive impact on revenues, Allen said.
There will also be a benefit to the yearlong extension of unemployment benefits, Allen said, as those payments will help stabilize the 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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