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No on Question 2: Official SMMC Stance

November 3, 2016

SMMC Official Stance 
Vote No on 2:
It’s Bad for Maine’s Business Recruitment & Growth

After surveying the membership, the Southern Midcoast Maine Chamber is
urging Maine citizens to vote NO on Question 2: The 3% Surcharge on Incomes Over $200,000

The Southern Midcoast Maine Chamber works with business owners daily and understands the importance of a quality education.  Our students of today are our workforce of tomorrow, and we believe that we always need to provide the best education for our students in Maine.  Yet, we do not feel that the solution presented by Question 2 is fair or equitable.  In the long run, it drastically hurts the business community in Maine.

1. If Question 2 passes Maine would have the highest income tax rate of any state for incomes
between $201K and $539K.  In recruitment of professionals like doctors, dentists, lawyers and
businesses in general, we feel this tax rate would put us at a competitive disadvantage, as several
recruiters and industry professionals have told us directly.  Only California has a higher income tax rate once you get over the $540K threshold, and Maine will remain 2nd nationally. 

2. Taxing only the highest income bracket, is a dangerous precedent and is also unreliable.  The over $200K taxpayers are the most mobile segment of our economy having the means and capability to move or claim residency elsewhere, making the funding source unreliable.  In 2007, the $157 million in the fund this year, would have only been $55 million. 

3. Nearly 11,000 of the 16,000 taxpayers in this income bracket are small business owners. The tax would apply to Maine businesses that pass their income through the owner’s individual income tax form,
including sub-chapter S corporations & Limited Liability Partnerships.  Another tax burden, on top of a possible minimum wage increase and the certainty of the ACA increases and the DOL New Overtime rules puts Maine at a competitive disadvantage in recruiting and retaining small business owners.

4. The distribution model does not make it fair to every part of the state and though Topsham & Brunswick schools would see direct dollars, Georgetown and West Bath would not.  We don’t believe an equitable
solution is one that helps some of our communities at the expense of others.
60% of the fund, over $90 million, goes to 28 school districts/towns, while 85 of the 230 get nothing.

5. Although proponents of Question 2 claim that the funds are earmarked specifically for education, the Maine State Constitution and a letter from the non-partisan Maine State Office of Fiscal & Program
Review, explicitly states that there is no way to prevent future legislators from redistributing this fund to whatever they see fit.  This is what happened with the casino & lottery money that was “earmarked” for education and now funds several other things. 

Finally, this referendum was developed as a solution to fund the shortfall resulting from a 2003 edict to have state government fund public schools at up to 55%.  This threshold has not been met by our legislators. 
The SMMC supports, rather than adding an additional tax to our Maine businesses,
that instead, we urge our elected officials to not ignore the 55% mandate that was passed in 2003,
and to fund our schools to the required level. 
If the 55% threshold would have been met by our elected officials, then this question would not exist.  

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