News

State and Local Tax Collections
How Does Maine Compare?
by J. Scott Moody, M.A. Maine Heritage Policy Center

Maine Heritage Policy Center has just completed a study examining Maine's state and local tax collections between state fiscal years 1958 and 2002 (the latest year available) and compares them against other states.

This study is the first of a series of reports that The Maine Heritage Policy Center will be publishing in the near future that will examine Maine's tax structure. These studies will lay the groundwork for a comprehensive tax reform plan for Maine that is scheduled to be released in the fall of 2006. The full study is available at http://www.mainepolicy.org/

Key findings include:

--Maine's state and local tax collections as a percent of personal income are growing at a faster pace than the national average-leading to a widening disparity between Maine and the national average.

-- Compared nationally, Maine had the 13th highest state and local tax collections as a percent of personal income in FY 1958, but by FY 2002, Maine ranked as the 2nd highest state.

-- Among the six New England states, Maine was in the middle of the pack in terms of state and local tax collections as a percent of personal income in FY 1958. By FY 2002, Maine ranked highest with collections 16 percent higher than next- highest Vermont.

--Tracking the national trend, the ratio of "state" as a portion of total tax collections (state and local) is expanding- seemingly in conflict with Maine's strong tradition of local control and self-sufficiency.

Maine's State and Local Tax Collections over Time

Maine's state and local (S&L) tax collections as a percent of personal income (PI) hovered just above the national average between FY 1958 and the early 1980's (see Chart 1 and Table 1)-averaging 0.6 percentage points higher. In two short-lived instances, Maine dropped below the national average between 1968-69 and 1977.

However, since the early 1980's, Maine's growth in S&L tax collections as a percent if PI has dramatically outpaced the national average. The growth in the national average of S&L tax collections since FY 1984 has been flat-starting and ending at 10.3 percent of PI. On the other hand, Maine's S&L tax collections have grown from 11.1 percent of PI in FY 1984 to 12.8 percent in FY 2002-an increase of 15.3 percent.