Imagine getting an unexpected bonus at the end of the year. It’s a nice windfall that we’d all appreciate. Would you feel differently if that bonus came at the expense of your colleagues getting access to child care? Or if it meant the lowest-paid workers in your organization wouldn’t get a raise? Would it change the major financial decisions you already made for that year based on your earnings?
Effectively this is the situation that many large corporations are about to find themselves in if Maine lawmakers sign off on a proposal to provide approximately $10 million in windfall profits for equipment purchases they already made. The key is that the equipment was bought well before any prospect of such a payoff, which would come compliments of the taxpayers of Maine.
MECEP’s economist, Joel Johnson, blogged on the technical aspects of what is called bonus depreciation and the decision lawmakers face to conform with recent federal tax law changes – which we choose to do or not do all the time. There’s an Appropriations Committee hearing scheduled on this issue on Thursday, January 29 at 2:30 in Augusta.
In any decision like this there are trade-offs. Lawmakers can decide to match the federal law and easily sign off on a $10 million check to large corporations, made possible in part by revenues coming in higher than forecasted. Or they can choose to use that $10 million for other important priorities that they’ve signed off on in the past but didn’t have the money to fund.
Such priorities include increased support for early childhood education or finally making the state’s earned income tax credit refundable for low-income workers who need it most. It is actions like these that will promote opportunity and boost Maine’s economy.
Those corporations that stand to gain if lawmakers go the other route bought the equipment before the taxpayer-funded subsidy was even under consideration. So it’s hard to see how the subsidy would help Maine’s economy. What’s more, even if we don’t conform with federal changes, they’ll still reap the same $10 million in benefits, just over a longer timeframe.
Chances are, this action, like so many that occur in Augusta, won’t garner many headlines unless lawmakers decide to go against the will of Governor LePage by rejecting the corporate windfall. I hope they decide to take a stand for everyday Maine citizens.
