FEELING GOOD IN A FOG
Last month the Maine House voted 142-0 to pass LD 1856, "An Act to Allow a Tax Credit for College Loan Repayments." The Senate passed it along to the governor by a margin of 27-8. It was signed into law this week with the usual flapdoodlious rhetoric.
This Act provides for reimbursement of education-related costs for Maine residents who obtain an associate degree or a bachelor's degree in this State, and live, work and pay taxes here thereafter. The text of the Act lists the following goals: 1) Promote economic opportunity by ensuring access to training and higher education; 2) Bring in more and higher-paying jobs by increasing the skill level of the workforce; 3) Increase educational opportunity; 4) Keep young people the State. All this is to be accomplished, we are told, with "as little bureaucracy as possible."
Some us will doubtful about the possibility of limiting bureaucracy in Maine's state government, given the lack of interest so far shown to the Brookings Report recommendation for setting up a Government Efficiency Commission. But that is a subject for another column.
The General Fund revenue loss associated with the tax credit is estimated to be $147,676 in fiscal year 2008-09.
There are a number of reasons for this overwhelming bi-partisan vote. The goals are worthy and there is no other proposal for attaining them on the table. Many Republicans welcome any tax reduction in any form. This is a kind of subsidy, and subsidies are hard for many politicians to resist"”which is why they exist in the thousands at every level of government around the world. The initial cost of less than $150,000 is a trifle. No one will remember who to blame when the cost rises to an estimated $9,100,000 in 2011-12 and $62,900,000 in 2017-18. The measure is certain to be popular; the citizen's initiative promoting it gathered over 70,000 signatures.
Why would senators Gooley, Mills, Turner, Nass, Rosen, Savage, Sherman, and Smith vote against LD 1856? There are a number of possible explanations.
The Taxation Committee's supposed objectives of simplifying Maine's bizarre system of taxation can hardly be served by creating yet another tax subsidy..
There is no reliable means of balancing costs against benefits since no one can say how many students plan to stay in Maine regardless of the subsidy.
The subsidy is equally available to the sons of clam diggers and daughters of millionaires. It makes no discrimination between the needy and the affluent"”all cash in who graduate from a Maine institution and work in Maine.
Let's do the math.
On the one hand, It is calculated that the average debt for students who have taken loans for their associate degrees is $10,813. For bachelor's degrees it is $21,625. They can claim a maximum annual tax credits of $2,100 per year. or $8,400 for all four years in a Maine college. OR, depending on who you read, the "cumulative" tax credit per resident is $21,000. Or possibly $22,100.
Whichever figure applies, it should be obvious that the financial inducement is not all that tempting for a graduate with valuable skills to offer in some economically vital state. In some states graduates will find the lower tax burden enough to balance off the $2,100 subsidy anyway.. Much as I like Maine and little as I liked New Jersey, I would have found such a paltry inducement far from adequate to detain me here.
LD 1856 is little more than a feels-good, looks-good law. There is no means of assessing its effectiveness in achieving any of the goals set out in its text. No way to determine whether economic activity has been increased. No way to measure any increase in higher-paying jobs. No way to assess an increase in educational opportunity. No way to determine which graduates stayed in the state because of the tax break and which planned to stay regardless.
All that can be determined is how much money a random group of Maine citizens saved from their taxes. They will be helped by it, but no one can know how much, or whether, the state's economy was helped by it.