Maine Governor Looking to Get Rid of State Income Tax

    Taxes, they are the life blood of the modern day bureaucracy. In the United States, the income tax has one of the largest tax bases of any tax available. Every dollar you make must be reported to the IRS. Some states administer an income tax separate from the IRS, Maine is one.

    There are many Governors who think they can just do away with the income tax in their state. Maine Governor Paul LePage is one who believes that the income tax is “becoming an obsolete form of taxation”. He plans on reducing the income taxation rate from 7.95% to 5.75%. The Governor will fill that gap with an increase in the sales tax. His fear is that Maine may not be able to “compete nationally and internationally” for business. The fear stems from people moving from Maine for states with lower income tax rates. The problem with this fear is that living arrangements are extremely sticky. This also requires people to understand that the taxes their paying is high relative to neighboring states. That is a pretty big assumption considering what people know about their own tax code. Not to mention the research a person has to do to make sure the local tax rates they are going to pay does not nullify their move.

    There is anecdotal evidence that supports LePage fears however. Boris Johnson, Mayor of London and arguable a very productive citizen, renounced his American citizenship because of the tax headache. The IRS aggressively pursued him for back taxes and Boris ended up paying a lump sum to settle his case. The problem with this evidence, which I realize there are a lot, is that Britain has higher income tax rates than the United States. The point being it is not the tax rate that people don’t like but what the government does with it.

1.History of Tax Rates in America http://taxfoundation.org/sites/taxfoundation.org/files/docs/fed_individual_rate_history_nominal.pdf

2. Maine’s Governor Wishes to Cut Income Tax Rate to Zero, Replace with Consumption Tax http://www.forbes.com/sites/travisbrown/2015/01/30/the-most-ambitious-tax-reform-plan-of-2015-comes-from-maine-governor-paul-lepage/

3.http://www.howmoneywalks.com/irs-tax-migration/

4.The long arm of the IRS: An Englishman’s home

http://www.economist.com/news/united-states/21644160-mayor-london-renounces-his-american-citizenship-englishmans-home