Higher taxes not a one-way street

Given the passage of several tax increases in Oklahoma and calls for larger tax increases in 2018, it’s worth noting how other states have fared when they pursued the higher-tax strategy. Maine provides the latest example. In 2016, voters in Maine approved a ballot measure that increased the incometax rate for those earning more than $200,000 by three percentage points. This set Maine’s top income tax rate at 10.15%, second-highest in the country.

The tax increase, promoted by teachers’ unions, was a classic “soak the rich” proposal. The 41% rate increase was expected to affect only about 7,000 filers in Maine and was expected to generate $157m a year, which would be earmarked for schools. Yet in June, Maine Revenue Services reported income tax collections for the year were largely unchanged, despite the dramatic rate increase.

Backers nonetheless insisted the tax increase was working, predicting increased collections … later.

Apparently, state law makers from both parties didn’t buy that argument. While a budget face-off led to a short government shutdown in Maine, the conclusion of that standoff ended with a budget agreement. The agreement eliminated the “surcharge” and provided increased school funding through other means.

Republicans hold the governorship and the Maine Senate, while Democrats control the House. The margin of control in both chambers is narrow. Yet the budget agreement passed the Maine House 147-2 and the Senate 35-0. This means many Democrats tacitly recognised “taxing the rich” is more effective as a slogan than in practice.

In Illinois, law makers approved a 67% income tax rate increase in 2011 and raised corporate income tax rates 46%. They then spent the next few years approving offsetting tax breaks for specific companies to keep them from leaving the state. Oklahoma City, July 10.