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April 4, 2023

Op-ed: We all pay the price for ineffective corporate tax giveaways 

Through taxes, the people of Maine provide the ingredients for a great place to do business — roads, ports, healthy families, an educated workforce and infrastructure improvements. So, it’s sensible and critical that we scrutinize efforts that restrict these vital investments in businesses, people and communities across Maine. 

Maine legislators are currently weighing a slew of proposals to divert taxpayer revenue to select businesses. Frequently under the guise of economic development, lawmakers give this money away in the form of tax breaks as a reward for certain behaviors. Many times, these are things businesses can and should be doing anyway, like investing in employee training, providing employee-attracting benefits like child care, and investing in capital improvements (for which they already get large depreciation credits). 

Maine Center for Economic Policy
Maura Pillsbury, Maine Center for Economic Policy 

But research shows business “tax giveaways” aren’t worth it. Business tax breaks cost Maine billions of dollars each year and their outcomes and impacts are often unclear. These tax giveaways are costly and sometimes poorly targeted. And when Maine diverts money towards unproven tax breaks, we lose revenue that would be better spent on programs that build our workforce and economy in ways that are measurably effective. 

The cost of ill-conceived and opaque subsidies is high. Business tax giveaways shift costs onto taxpayers, take money from other important priorities and perpetuate wealth inequality by giving money to wealthy corporations. Almost $700 million is withheld from the paychecks of working people each year to give subsidies to big corporations. 

The state of Maine calls Pine Tree Development Zones (PTDZ) its “most important economic development program.” PTDZ waives all income and sales tax and refunds payroll tax for five years to employers for creating as little as one job.

One of the richest beneficiaries of this program is Nine Dragons Paper Holdings, which has purchased and rehabbed paper mills in Maine, and is owned by one of the wealthiest families in the world. In addition to receiving the PTDZ credit, Nine Dragons also received $12 million in tax credits under the New Markets Capital Investment program as well as another $1 million in federal funds intended to help the state recover from the COVID-19 pandemic. 

That's a lot of money for some very rich people. Will it actually impact whether or not they continue to do business in Maine? Would wealthy corporations like Walmart cease operating in Maine without state subsidies? Is this how we want to be spending our valuable resources? 

Supporting tax giveaway programs in the hope that they will solve an industry's challenges or boost Maine’s economy only puts a band-aid on deeper, systemic problems. This year, Maine has an opportunity to change how it approaches economic development. We have an opportunity to stop giving handouts to businesses that can't provide a return on our investment. 

We should make data on business tax giveaways transparent and accessible to the public and ensure businesses receiving tax breaks achieve expected outcomes. We should end unproven tax expenditures and dedicate resources to evidence-based policies and programs that will improve the lives of Mainers, like the child tax credit and paid family and medical leave. 

Working Mainers pay their fair share in taxes. It’s time for businesses to stop seeking carveouts for actions they likely would have taken anyway. Do we want to be lining the pockets of wealthy, out-of-state corporations or investing in the people and small businesses of Maine? The answer should be clear. 

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1 Comments

Martin Grohman Grohman
April 10, 2023

At last check, people were not lining up to purchase and rehab rural Maine paper mills, and when it does happen, as in Rumford, it is a very desirable outcome. I hope you publish a counterpoint to this!

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