Additional Articles for May 2004 Issue

Report from Augusta:
No thaw in sight for Maine's frigid business climate

If any further evidence of Maine’s continued hostility toward business were needed, the Maine Development Foundation recently released its 2004 edition of the annual Measures of Growth. Of the seven measures listed under “Business Climate,” four are given “red flags” which indicate issues that “particularly need attention.” There are only five other red flags in the entire document, which contains measures of nearly 50 other indices of economic and community growth.

With findings like these, one might think extra care would have been taken this session to ensure that business climate is at least made no worse, and at best, improved. No such luck.

Among the most appalling failures identified in the report is the stunning rise in cost of doing business. When the benchmarks were established in 1997, the hope was that Maine’s cost of business would drop from 106 on a scale where the U.S. average is 100, to 103 by 2005. By 2002, the latest year with data, the Maine score had instead risen to 110, 8th highest in the nation. In the words of the report itself, “cost of doing business has increased 4 percent over the past five years. This represents a serious competitive disadvantage for Maine-based businesses.” From labor costs to energy costs to tax and regulatory burden, the cost of being in business continues to climb.

How did the legislature do this past session with regard to this measure? While several business-hostile bills were mercifully defeated, many were passed. Most notably was the expansion of unemployment to cover part-time workers, a provision that the Labor Department predicts will ultimately cost $60 million over the next decade. A recently-passed bill would allow private contractors in the forest industry to organize, much like a union and seemingly in violation of anti-trust laws, in order to pry concessions from large landowners. In such ways, the costs of business continue to climb.

Another notable measure in the report was the state and local tax burden. The report measures total tax burden per $1,000 of income, and compares Maine against the rest of New England. It will come as no surprise to taxpayers here that Maine exceeds the New England average by $26 per $1,000 of income. When the benchmark was set in 1992, it was hoped that the gap would narrow to less than $7 by 2005. Doesn’t look like we’ll make it.

And how did the legislature do on this measure? The governor made a commitment not to raise broad-based taxes during his tenure, and, if you define “broad-based” taxes as sales and income taxes, he has kept to his word. Unfortunately, fees were increased on any number of services, instead, including corporate filing fees and myriad licensing fees.

Worse still the failure of the legislature to enact any kind of property tax reform means no relief in sight for Maine’s most hated tax. Limited state spending on schools means local taxes to support them will have to rise, meaning, ironically, property tax increases. It is unlikely that we made much progress on this issue.

Yet another Session of legislative misdeeds such as these should reinforce for business owners the notion that serious change is needed in Augusta. The good work of the Maine Economic Research Institute (available at www.me-ri.org) provides business owners with all the information they need to know who is friendly to Maine’s businesses and who is not. As candidates prepare for the June primaries and come looking for support, be sure to see where they stand on making Maine a more business-friendly state. Let’s hope the next “Measures of Growth” tells a different story.

Stephen L. Bowen <repbowen@earthlink.net> has just completed his first term as House Representative from Rockport-Camden. He is a regular contributor to the Midcoast Review.