Mixed reviews from Maine on Bush tax plan

By Deirdre Fulton

WASHINGTON – Some Maine legislators are skeptical about President Bush’s tax proposal, despite potential tax relief that could particularly benefit senior citizens.

Senior citizens in Maine have said they want lower taxes, according to a 2001 survey conducted by the Maine Development Foundation, a collaboration of private and public organizations formed to promote Maine’s economy. Second only to improved assisted living and home care, lower taxes were a factor named by a significant percentage of elderly residents as a way to help seniors stay independent.

Proponents of President Bush’s dividend tax cut proposal, included in the budget he sent to Congress Monday, say seniors will derive significant benefits if the tax cut is adopted. Currently, dividend earnings are “doubly taxed,” the administration says – first as income on the corporate level and then as income on the personal level – decreasing the amount of money placed in the pocket of the shareholder.

For seniors who live off a fixed income, with taxable dividends a significant portion of their earnings, elimination of the tax on dividends would provide more money and economic security, the administration says.

Approximately “half of all dividend income goes to America’s seniors, who often rely on these checks as a steady source of retirement income,” R. Glenn Hubbard, chairman of the president’s Council of Economic Advisers, testified at a Senate Special Committee on Aging hearing Tuesday.

Maine’s population is growing older. About 14 percent of the total state population is over the age of 65, according to Maine’s Bureau of Elder and Adult Services.

Certainly any type of tax relief for these people living on a fixed income is a beneficial thing, said Carol Palesky, 62-year-old president of the Maine Taxpayer Action Network.

But Maine officials expressed doubt about the number of Maine senior citizens who will actually reap the specific benefits of a dividend tax cut.

“Maine’s senior population is not affluent,” said Republican Sen. Susan M. Collins, a member of the Special Committee on Aging, in an interview yesterday. “The average Maine senior is not just living on dividend income.”

Collins said she was enthusiastic about other proposed reforms that could benefit the elderly population to a greater degree, including prescription drug benefits. While the elimination of the dividend tax can be intellectually justified and therefore considered in the future as part of a tax reform initiative, Collins said, she added that she worries it will not stimulate the economy in the short term and should not be considered as part of an economic stimulus plan.

Democratic Rep. Thomas Allen said the president’s tax plan would have little success in stimulating the economy. He added that while the elderly would be the major beneficiaries of the administration’s dividend proposal, it would be wealthy seniors – which Maine lacks – who would benefit most. Rather than improving the situation of low-income seniors and citizens in general,the tax cut would favor the wealthy and increase the debt, he said.

“There is not an ounce of fiscal responsibility in this budget,” Allen said. “If you’re low-income, you’re in big trouble under this budget.”

But regardless of whether seniors or any other Americans see a dividend check, they will benefit in the wider sense from an improved economy, Hubbard said at the hearing, which was held to examine the effects of the dividend tax cut on seniors. With more capital available, wages will be higher and low-income citizens will experience benefits as well, he said.

Maine Democratic Party chairwoman Barbara Raths, in a telephone interview, raised another concern related to the proposed tax cut. With a widening federal deficit, she said, less money would be available to states. According to Raths, the Center on Budget and Policy Priorities—a think tank in Washington--calculated that if the Bush dividend tax plan had been in effect in 2000, Maine would have lost $31 million in revenue.

Collins predicted that the Senate would most likely reshape the president’s tax proposal as a whole and specifically address the dividend tax plan before approving the measure.

Published in The Kennebec Journal and The Morning Sentinel, in Maine.