Maine State Tax Debate.

The following was sent via my local Chamber of Commerce. This is the best debate on the tax issue that I have come across .

Proposition 1 facing voters in the June 8 Gubernatorial primary proposes to rescind a major tax revision passed by the Legislature last year dropping the maximum state income tax from 8 1/2% to 6 1/2% but expanding the state's sales tax to make up the lost revenue.


A "YES” vote agrees with Prop 1 - that is, cancels these revisions. A "NO” vote says keep them.

The Boothbay Harbor Region Chamber of Commerce's newly formed Public Policy committee has asked our Local legislators Senator David Trahan (R-Waldoboro) and Representative Bruce MacDonald (D-Boothbay) to explain how these tax revisions will impact on a) economic development, b) small business, c) residents and d) state revenues. Plus list three other critical considerations. Their answers are below.

(Public Policy committee members are Chair Lori Bailey, Wayne Sheridan, Lindy Bragg, Bill Bailey, Lisa McSwain and Hamilton Meserve).

What's the impact of Proposition 1 on:

1. Maine's economic development and attracting investment and good paying jobs?

SENATOR TRAHAN: Question 1 will further depress the job market. I see no positive effect on Maine’s business climate; I see the opposite for several reasons. The new tax reform law creates a disincentive for any business or individual to come to Maine. Contained within the law is a redefinition of residency for the purpose of income. If a person moves to Maine on Jan. 2nd of the tax year they are not eligible for the resident income tax credit. If that person earned an income equivalent to a 2% effective rate, that individual under the new law would have to pay 6.5% with no credit. This welcome home tax is a 350% increase in the income tax, hardly an attraction for anyone.

REP. MACDONALD: The new tax law was carefully crafted to spur economic development. There is no greater impediment to business attraction (and business investment) than Maine’s 8.5% top income tax rate (which is also the capital gains rate). Maine has the 6th highest rate in the nation, and that is often a “show stopper”. The new law will lower this top rate from 8.5% to 6.5% on income under $250,000 and to 6.85% on income over $250,000. In the words of Wick Johnson, President of Kennebec Technologies and a member of the State Chamber Board, “This is a game changer!”

Some people worry that the new sales taxes will negatively impact business, but most economists do not. The sales tax expansion is modest, and over 95% of it is in consumer services not business-to-business services. The modest negative impacts that SOME businesses may see are expected to be far outweighed by the positive impacts on those same businesses (from the extra income in their customers’ hands, as well as their own tax benefits).

The increase in the meals and lodging tax from 7% to 8.5% keeps Maine’s rate at a competitive level, still below New Hampshire and Vermont (which are both 9%), and far below the national average (of 12.5%). Vermont saw no negative impact on business when it went from 7% to 9% a few years ago. In addition, the new law provides over $4 million a year in new money for tourism promotion, which is a proven way to increase business.

2. Maine's small business growth, currently the chief generator of jobs statewide?

SENATOR TRAHAN: Question 1 punishes small businesses with increased costs. Price Waterhouse Coopers did a 2006 study on streamlining the sale tax and found that for a business doing $1 million in sales or less, the cost of administering the sale tax was 13.5% of the tax collected. For a business above $1 million, the cost was 2.2%. Obviously, the costs are much more for a small business, with less opportunity to absorb new costs. Ninety percent of businesses in Maine are small business; worse, every dollar collected must be remitted to the state, who will pay the extra cost? Either the consumer or the business -- neither is acceptable in the current economic climate. Last winter, when Governor Baldacci amended the law to remove ski tickets and golf greens fees from the over 100 new items to be taxed, he cited the negative impacts of taxing these industries. Why is taxing golf and skiing bad for business and the other thousands of small business sales taxes and raising meals and lodging taxes ok for business? The answer is, it is not, except these businesses had no effective lobby.

REP. MACDONALD: Maine’s small businesses will benefit in a big way under of this new law. Almost all of Maine’s small businesses are partnerships, sole-proprietorships, or S-corps that pay business taxes under the individual income tax, and the new laws lowers the individual income tax. The top rate drops from 8.5% to 6.5%, but the effective tax rate drops to far below 6.5% for almost all Mainers. (Despite rumors to the contrary, business deduction are NOT changed by the new law.) In addition, Maine’s capital gains rate drops by about 25%. This will make a HUGE difference to small business owners when they sell their business.

Beyond this, the new law will put $54 million in new money in Mainers’ pockets. (Mainers will see income taxes lowered by $107 million and sales taxes increased by $53 million, for a NET tax reduction of $54 million.) Much of that money is expected to be spent at Maine’s businesses. The State Planning Office conservatively estimates that this will create 750 new jobs, most at small businesses.

Opponents say that it will be a big burden for small business to collect new sales taxes, but their numbers come from a study is that is not applicable to the kind of changes we are making in Maine. In addition, most of the impacted businesses are already collecting taxes on some items.

3. Mainer's disposable income?

SENATOR TRAHAN: Question 1 will only make it worse. Maine is one of the poorest states in the nation with one of the top tax burdens. Our per capita income is somewhere near 36 in the nation and our tax burden as a share of income is 6th in the nation. This law taxes services like, auto repairs, appliance repair and repair of lawn and garden equipment. Who do you think pays the taxes? Certainly not out-of-staters as supporters of this law imply. Mainers also pay the lion’s share of the meals tax. On the subject of out-of-staters, who made them the bad guy, who should pay higher taxes? For every new tax dollar collected and sent to Augusta, it is one less dollar spent in our communities. Maine Revenue Services estimates that for every dollar collected from out of staters, $2 is collected from Maine residents. This new law relies on the concept of collecting $100 million in new sales and income taxes and then redistributing the money in an elaborate credit system. For historical purposes, this fact is important, over the last 8 years, the Maine Legislature and the Governor have, by statute, adjusted taxes, fees, assessments, and credits to raise money over 340 times for a total of $1.6 billion. Do any of you believe this new money will come back without the state keeping a cut? For those who said yes, sorry but the law is designed to do exactly that.

There is a not so clever gimmick buried in the law that eliminates inflation indexing of credits and income tax rates until the year 2014. It is worth noting in 2002 Legislators restored indexing with the intention it occur each year. According to data supplied by Maine Revenue Services, taxpayers lose between $8 and $12 million each year when indexing is removed. Your loss is the State’s gain. Thousands of taxpayers that get a small tax cut in the first year of reform, unfortunately, they will lose the tax cut in subsequent years. MRS reports, for the year 2013 a group of less than 5,000 taxpayers earning over $340,000 will get a net tax cut of $34 million, while the other 99.3% of Mainers who pay taxes will see their bills soar by $8 million. It is true, there are winners and losers in each category, but this new tax code will leave behind a long trail of victims.

REP. MACDONALD: As noted above, Mainers will have an extra $54 million in their pockets in 2011. Opponents of the new law have made a big point of the fact that this amount decreases to about $32 million in 2013 (under current projections) before leveling off after that. However, $32 million is still $32 million MORE than Mainers will have in their pockets without the new law. Beyond that, there is every indication (with the economy beginning to improve) that the increase in disposable income will be higher than $32 million.

According to Maine Revenue Services, 9 of 10 Mainers will have extra money in their pockets in 2011 and at least 8 out of 10 Mainers will have extra money in 2013 (though the situation for 2013 could improve from that). You may see different numbers from some of the opponents of this law, but their analysis has been discredited by Maine Revenue Services (See Free Press, May 20 issue).

4. Maine's government revenue intake?

SENATOR TRAHAN: More money for the state means less money in your pocket. The loss of indexing of income taxes for three years will result in about $40 million in additional tax revenue in 2013 assuming a 2.5% inflation factor in years 2011-2013. In addition, inflation will increase the new sales tax collections by another $7 million, so the law raises about $47 million more revenue than current tax law that will stay in Augusta.

More tax collectors on the trail. The law also keeps $1 million to hire new revenue agents, another $4 million for the tourism fund, and this little jewel. According to Maine Revenue Services estimates, mostly elderly and on fixed incomes will pay more in sales taxes under the plan. It is true that they will be eligible for a tax credit of about fifty bucks, seventy for couples. Of course, these taxpayers will have to file an income tax return to get it. The state is betting many won’t bother. In fact, the tax folks in Augusta have tucked away $5.7 million dollars in the budget based on the expectation that 112,000 Mainers won’t even bother to claim the credit. Obviously, the bill is not revenue neutral.

REP. MACDONALD: The new law is designed to be “revenue neutral,” meaning that it will bring in approximately the same amount of money. (This is confirmed by Maine Revenues Service’s analysis, which extends through 2013.) If these numbers are off and the law takes in more revenue than expected, the law contains a provision to provide more tax relief back to Mainers (by increasing the new household credit) so that it remains revenue neutral.

Some may ask: Why bother to change the tax code if you are going to take in the same amount of money? They are missing the point. Tax reform is all about collecting taxes in a smarter way. Why wouldn’t we want to collect revenue in a way that spurs economic development and at the same time rewards Maine residents and residency? Having a smarter tax code make sense regardless of what budgetary decisions are made in Augusta. There will always be tensions between people who want to see the state spend more and those who want the state to spend less; but that is a separate issue. Regardless of spending decisions (made now or in the future), the state and its residents will benefit from this new law.

What three other factors should Maine voters weigh concerning Prop 1?

SENATOR TRAHAN: Don’t get sick or donate to your local charity - you’ll pay more income taxes. That’s the message in the new tax shift law. The tax collectors in Augusta estimate 81,000 Maine families will pay significantly higher taxes. This unfortunate group is made up mostly of individuals with high deductions for medical expenses, interest expense, charitable donations and property taxes. These deductions are repealed and replaced with a complicated capped credit system.

102 new taxes on the way! If this new law is not repealed in June, the sales tax will be expanded to 102 new items and services. Thousands of small businesses throughout the state will have to start collecting taxes and will be subject to potential new auditing by Maine Revenue Services.

Just the beginning! If this law is not repealed on June 8th, supporters in Augusta will claim Maine people support expanding the sales tax. There are currently $2 billion in sales tax exemptions on the books. This bill is just a foot in the door and the path to an endless supply of money to fund the state budget. We have seen many bills to expand the sales tax further, to items like, newspapers, haircuts, plumbing and carpenter services, legal services and to tax non-profits. If this law is not repealed, who can argue that their industry deserves a pass, while other industries should be taxed? This law is just the beginning and if not repealed with a yes vote on June 8th, expect more of the same.

1) REP. MACDONALD: The new law will help stabilize state revenues during tough times, by broadening and diversifying our tax base. At present, Maine has one of the narrowest sale tax bases in the country. In good years, 40% of sales tax revenue comes from the sale of just two items (new cars and building supplies). This revenue falls off to close to nothing when the economy falls, and we all suffer. We will all see higher property taxes in the future because of the cuts in state aid to education that result when state revenues fall so far. Budget cuts to health care providers including nursing homes and hospitals have a negative impact on our health. This new tax system will help cushion these swings in revenue due to downturns in the economy.

2) The new law will provide tax relief to Mainers. Over 95% of Mainers will see a reduction in their income taxes and over 87% will see a reduction in overall taxes AFTER any new sales taxes are added in. You can see precisely the impact on you by going to the “tax calculator” at Maine Revenue Service’s website at http://www.maine.gov/REVENUE/incomeestate/1040/taxreformindividual.htm



3) The new law is fair, on various levels. First, it is fair to visitors and non-residents, who will still be paying lower sales taxes than in most other states. Second, it is fair to Mainers, by spreading the benefits across all income groups. Some opponents of the law had the audacity to claim that this law is a give away to the rich. This is a completely UNFAIR and UNTRUE statement that Maine Revenues Services has denounced. All income groups benefit under the new law, but low and middle-income people receive slightly more of the benefit, proportionally.

Director of the Maine Department of Innovation describes Mainers as having "blank stares "

Below is copied from the Maine Department of Innovation News Letter which I recently recieved.

Notes from the Director of Office of Innovation

A few weeks ago, Thomas Friedman wrote an article for the New York Times that talked about the importance of a more entrepreneur-friendly environment. He called upon President Obama to make 2010 the year of innovation, the year of Start-Up America. Similarly, Carl Schramm, president and CEO of the Ewing Marion Kauffman Foundation called upon policymakers to promote entrepreneurship to spur job creation and speed recovery. Study after study points out the importance of entrepreneurship to fostering economic growth, as the "carrier of innovation."

Yet here in Maine, suggest that we should assist entrepreneurs and you get blank stares. Solutions such as tax reductions, regulatory reform and greater access to capital, while all helpful, are not sufficient to create the entrepreneurial climate that we need.

Entrepreneurs in the high-growth, high-potential technology-driven start-ups, for instance, often need significant technical assistance in specialized management challenges such as intellectual property protection strategies, equity financing deal structures, transitioning from prototype to manufacturing, market penetration and others. All entrepreneurs benefit from mentors, coaches, peer networks, relationships with university and other researchers, and recognition from their communities.

We simply cannot assume that any one tool such as quality of life or access to capital or business climate will get us the vibrant economy we all want. The experience of countless communities, states and countries demonstrates the need for a coordinated and thoughtful approach to developing entrepreneurship.

Cathy

The Director of the Office of Innovation is a Maine Public Employee.The Office of Innovation is capitalized by the Maine state tax payer. What do you think is meant when the Maine people are described as having "blank stares" on their faces? Does it sound like the speaker can indentify with the people of Maine ?


What do you think the Mainers with "blank stares" might be thinking when the director explains that it requires capital to fund business growth? I wonder if the director understands where the capital used to fund the government agenda comes from?

LD1- A Transference of the Power of Taxation?

Letter submittted to the Boothbay Register
May 2, 2010- I am glad to say that this letter is published in the issue coming out on May 05, 2010.

This article was also published on The Augusta Insider. When The Augusta Insider "merged" with Pine Tree Politics all articles examining state capitalism in Maine were no longer available.

A Call For a People's Veto.
Dear Editor,

I recently submitted a letter, which was also sent to Senator Trahan, who did not respond. This letter concerned the use of taxpayer funding by the Small Enterprise Growth Fund and the proposed LD1 and LD1666. LD 1666 was rejected by the appropriations committee but subsumed into LD1 and then passed unanimously by both the House and the Senate and signed into law by Governor Baldacci.

The Maine Chamber of Commerce describes LD1 as “An Act To Stimulate Capital Investment for Innovative Businesses in Maine”. LD1 is marketed by the Small Enterprise Growth Fund with the following words “This program creates incentives for 20 Million Dollars in the Public Employee Retirement System that have already been targeted for equity investments to be placed in funds that are seeking to invest in innovative Maine businesses.”

I am not a legal expert but such expertise is not required to have general knowledge that when it comes to the law, it is the letter of the law that counts and not external promises or descriptions. When one reads LD1, one will find that in Section 6. Investment goals & guidelines, begins with the words “The purpose of the fund is to invest in a series of high-quality venture capital funds managed to produce a favorable aggregate return among diversified investments, to secure repayment of the amounts borrowed and to minimize the risk of tax credit redemption. Consistent with these investment goals, the board shall give preference to fund managers whose strategies include:

A. Maintaining at least a periodic presence in the State;

B. Actively prospecting for investments in the State;

C. Creating or retaining jobs in the State; and

D. Bringing to fruition the ideas, technologies and intellectual property produced by citizens and institutions of the State. “

The language is vague and suggestive, avoiding specificity and allowing great latitude in interpretation and application. In the phrase “Maintaining at least a periodic presence in the state”, the terms “periodic” and “presence” are left undefined, while the use of the words “at least” permits the “presence” in Maine to be a mere token. The non-existent parameters for retaining jobs in the state can be satisfied by the bureaucratic jobs within the SEGF. As for “bringing to fruition the ideas produced by Maine citizens”, there are no specifics about where and how these ideas will be brought to fruition. Since the current government management of Maine’s economy is invested in technological development and since LD1 Is very arguably a charter for a mutual funds corporation, the language of this bill all too easily enables ideas to be developed in Maine and brought to fruition in countries with low labor costs and minimal environmental restrictions, which produce that “quality” investment in the context of the profit motivation of mutual funds

The bill defines “lender” in such terms as would be otherwise be signified by the term “investor”. The preferred “lender” is The Maine Public Employees Management Fund, which, at first glance, has stricter investing requirements than are written in LD1. If the Maine Public Employees Management Fund declines to invest, “the Fund of Funds” can seek other investors.

In section 9, Audits and Reports, LD1 is suddenly written in very specific terms. Section 9 deals with the relationship between the director of “The Fund of Funds” and the SEGF . Section 9 leaves nothing to interpretation when it specifically defines the length of time that constitutes a period, showing clearly that the writers of this law know how and when to be specific.

One instance in which LD1 is very specific is in Section 7, Investment Restrictions, where the exact words are “The fund may not invest directly in individual businesses but only in venture capital funds…” And yet in promoting this bill it is specifically described as a bill to create funds for “innovative” Maine businesses. Other than a requirement to invest 30,000.00 annually in the Maine Patent Fund, there is no specific wording in this bill that requires more than a token investment in businesses located in Maine.

The SEGF promotes this government chartered mutual fund as a means to take the burden off the Maine taxpayer, when in fact it takes the burden of failure off the SEGF and the individual or institutional investors in ” the Fund of Funds” and places it on the Maine Taxpayer in the form of a “tax credit”, which has no specific relationship to “tax payer”. The “tax credit” is guaranteed by a certificate, for which the letter of the law provides no specific requirements or caps, leaving it solely to the discretion of the SEGF. The tax credit will be used to cover any shortfalls that the Fund of Funds runs up against and is said to be legally binding according to Article One, Section 11 of the Maine State Constitution.

I have to question whether the certificates can be legally binding on the Maine state taxpayer because LD1 states “The board (The SEGF) may raise capital for the fund by offering as security certificates issued by the board.”

The SEGF does not have a government website, which suggest that it is a private corporation which has been enabled by our legislature to advance it’s causes using taxpayer dollars to it’s advantage. Section 9 of the Maine State Constitution- Power of taxation, states “ The Legislature shall never, in any manner, suspend or surrender the power of taxation.” A private corporation cannot make binding agreements for the Maine State taxpayer. By obligating the taxpayer to cover shortfalls within the SEGF with “tax credits”, it is implied that taxes will have to be raised as a means of financing the “tax credits”- as needed.

The language of LD1 is very murky about identifying the authority that is granted power to define the terms of the “certificates” backed up by “tax-credits”. It is the job of the legislature to establish the terms of contract, but in the case of LD1 these terms are left undefined- or worse deferred to the SEGF in the following:

1. Credit allowed. A lender to the Maine Fund of Funds as defined in Title 10, section 396, subsection 5 is allowed a refundable credit against the taxes imposed by this Part in an amount certified by the Small Enterprise Growth Board as established under Title 10, section 384 as equal to the shortfall in scheduled payments on debt incurred to provide capital to the Maine Fund of Funds.

If the authority to define the terms of agreement remains with the legislature, then the legislature has granted itself the authority to negotiate business contracts, which belongs to the executive branch of government. The Maine State Constitution, Article IV, Section 14 states “Corporations shall be formed under general laws, and shall not be created by special Acts of the Legislature…” Our legislature seems to believe that it can get around the Maine State Constitution through carefully parsed language and that a corporation by another name is not a corporation.

Based on the LD1 vote, all incumbents should be voted out of office. This Act was passed by “the Rule of the Gavel” where by there is a call for objections and if there are none, all are considered to have voted yes.

Article IV, Section 18 of the Maine State Constitution outlines the process by which the people of Maine can veto bills passed by the legislature. There is a 90-day window of opportunity after the close of the legislative session. In LD1. the taxpayer carries the risk but not does not share in the gain. I have created a Facebook page, “Maine Citizens Against Government Chartered Corporations” to find out if there is enough support among the Maine people to warrant initiating a People’s Veto.

An additional effect of mobilizing a People’s Veto is that it would force government-chartered corporations as an election campaign issue. We know that all incumbents are supporting government chartered investment corporations but thus far, to my knowledge, none of the other candidates for state positions have spoken out on this issue, offering no guarantee that electing a non-incumbent would have any effect on moving back toward a constitutional separation between the state and the capitalistic corporation.

I have written on this subject for the online magazine, The Augusta Insider, under the title, “Socializing the Risk and Privatizing the Gain” This article provides links to the bill and the statute used to authorize it. I hope to encourage an open dialogue about what the actual letter of the law legitimizes and to encourage the citizens of Maine to become more actively involved in reading the bills being passed by our legislature rather than accepting the promotional words about said bills at face value, without further examination or debate. The Maine State constitution needs to be included in that debate.





Sincerely



Susan Mackenzie Andersen

East Boothbay, Maine

Mackenzie is a new contributor at Augusta Insider

As of yesterday I am a new contributor at Augusta Insider. The Augusta Insider is a forum that attempts to represent a cross section of Maine politics and culture.

I have invited Senator Trahan to respond to my Open Letter withing that forum.

A personal story about an encounter between the private economy and the government/non-profit sector

I don't usually publish articles so soon in succession, and I had reservations about going public with my personal story, but learning about the new legislation recently passed, I am on fire- and, Oh well, what the heck!

This posts follows the post Who Benefits and Who Pays for Maine's Big Government, where I have explained my objections to LD166 in more detail

Dear Senator Trahan,

Regarding the “tax credit” being offered to tax exempt organizations that “invest” in Maine businesses. Maine is a state in which government jobs are growing at faster rate than the private sector, understandably since the private sector's self generated profits, which also function as it’s “roll-over capitalization” are being extracted to fund big government and all those to whom big government is distributing special favors, including the non-profit sector, as it excludes the micro-economy.

A few years ago, I became acutely aware of the function that non-profit organization play in wealth redistribution and why our state government maintains such a close bond with the tax-exempt sector of our economy. This was when I was invited to a “networking “ meeting by the non-profit ceramic workshop, Watershed. Watershed is located just off the Boothbay peninsula and is situated in close proximity to the “cluster industry” of ceramic studio productions that have sprouted up in the Boothbay Region since my parents first pioneered the concept in the mid-century. My father had long expressed the idea that the ceramic studios should form a network that is mutually supportive, and so upon receiving the invitation, we took it to be coming from such a place, sub-consciously ignoring the other message, which was that the meeting was a “celebration” of Watershed’s project, called something on the order of the “mudfest”. This is not quite right but the name incorporated the word “mud”, which I later found to be quite apropos.

Upon attending the meeting I learned that this was a project funded by a matching fund from Governor Baldacci. The grant was for teaching people to make ceramic mud pies, about which I kid you not and am not exaggerating in any way. The small dish that Watershed was teaching people to make looked exactly like an ordinary attempt by a three year old to make a ceramic dish. It had no grace, style or idea beyond that. In plain language, it was ugly and unimaginative.

I suspect that the content of what Watershed was teaching had no import to our governor. He recognized that with the governor's agreement for a matching fund, that Watershed would easily find others to invest in their project of teaching the public to make ceramic mud pies. This became clear to me as if a light had suddenly been turned on. Non-profits are instrumental for attracting capital into the state. It matters not the quality of what they are doing, only their non-profit status matters because this allows then to accept donations- and this also enlightens LD166 and it’s inclusion of non-profits in the tax credit, which for that purpose, only, they will be treated as taxpayers. This is incentive for non-profits to procure money to invest in the government-favored sector of the economy.

The speakers at Watershed said they had a plan for expanding the teaching of mud pie making, hoping to involve all who were in attendance. I seemed to be the only representative of the private economy. I asked why would we have special classes when we already train people on the job. The response was that since Andersen Design is already well known, we do not need any publicity. I was astounded but I continued to try to listen. However I could no longer hold my tongue when the discussion turned to how much they could charge the public for the mud pies. The only criteria were what they might expect the public would pay.

There was a young woman, who looked no older than twenty, I will call her Jane. Jane had received a grant of five hundred dollars to give workshops in mud pie making. She had come up with a brilliant marketing concept. Instead of charging for the mud pie, she would charge for the event and give the mud pies away as part of the event. She clearly perceived the true value of the mud pies.

Finally I could no longer hold my tongue and I spoke about how, if one were in business one would have to calculate the price by cost and that one would also be in competition with imported goods made in countries with low labor costs and practically no environmental regulations. I saw in the eyes of the young people that they were very interested in what I was saying but when I finished, one of the older women associated with Watershed, told me that they are not interested in what I had to say, they are interested in what Jane has to say. At that point I had had enough of this madness and left the meeting.

I come from a family that started an influential and globally recognized ceramic art, design and slip-cast production business, over half a century ago but, in the eyes of Watershed, what I had to say was of no value in comparison to a twenty-year-old novice. This attitude that is consistent with my interactions with the non-profit-government community since "the creative economy" movement was initiated by Governor Baldacci.

I learned that it is common practice for Watershed to charge students for classes, permit them to keep a couple of the pieces that they make, and then have a benefit for Watershed where by they sell off the rest of the work. So while the private economy's, slip-cast, “cluster industry”, has been providing training in genuine ceramic skills, at our own expense; non-profits have been receiving grants to give classes. Some of these non-profits may be giving classes in valuable skills, but I saw no level of skill required in the Maine state government-funded project of Watershed. So while the private economy has to pay into the system that covers workers rights, Watershed does not, and while the private economy has to pay it’s employees as part of our production over head, Watershed actually charges students to make work that Watershed then sells for it’s own benefit.

I thought at first that the purpose of the classes was to train people in skills that they might use to develop a livelihood, but in that I was mistaken. Jane was required to give the profits she made to a charity. She chose a soup kitchen. The profit she made equaled the amount of the grant she received. I never learned who covered the cost of the overhead for firing the pieces. The non-profit, Watershed, believes it is doing “public good” by providing charity for the poor. As a representative of the private economy sector, I believe that we do “public good” by providing jobs.

This story is just one of many that I could tell about my encounters with the government-nonprofit community. I have tried to keep an open mind but I have found that the attitudes expressed here in are typical of the attitude that the government-nonprofit sector has toward the private (micro) economy sector, which provides the underlying funding for the government-nonprofit sector. To use a popular word. This is “unsustainable” economics.

FYI, there will be an article on Andersen Studio in the upcoming Maine Boats and Harbors, written by my nephew, the author and journalist, Colin Woodard. We will also be featured in the next issue of Atomic Ranch, a quarterly magazine from Oregon on mid-century design.

Who Benefits and Who Pays for Maine's Big Government Management of Our Economy?

An Open Letter to Senator Trahan,


Dear Senator Trahan,

I wrote to you in the past about The Small Enterprise Growth Fund, an investment corporation created by the Maine State legislature for the purpose of attracting high growth venture capitalists to Maine.

At the time I suggested that “the Fund” should “roll over” to invest in the micro-economy, which you thought was a good idea. I am now writing to say that I think it is a terrible idea. It is redundant and wasteful, as it requires an expensive government bureaucracy to select which small businesses in the micro economy will be the beneficiaries. Given Maine’s deficit, it would make more sense to eliminate the taxpayer investment in the Small Enterprise Growth Fund, allowing the micro economy to retain more of their self-generated profits, which is the primary source of capitalization within the micro-economy.

You said the Small Enterprise Growth Fund is one government program that is working quite well. I have heard this before. I read such statements in the Small Enterprise Growth Fund’s email updates, but those statements leave me wanting for more information. Information about The Small Enterprise Growth Fund is difficult to uncover because the legislation that created it states that the SEGF will report to the legislature, bypassing the general public.

I am on the mailing list for the Small Enterprise Growth Fund and The Office of Innovation, The email newsletters read like advertisements and political slogans. I use them as a starting point to uncover the real facts. However I have yet to find the annual report of the Small Enterprise Growth Fund. It may be publicly available, but if so, it is certainly not well publicized- and so fundamental facts such as the identity of the private investors with whom the Maine state taxpayer is in partnership, through the SEGF, remains a mystery. Since the taxpayer portion of the profits always “rolls over to re-invest in the fund, while the private investor demands an “exit strategy” (selling the business), I submit that the tax payer contribution to the Small Enterprise Growth Fund is functioning as a bribe to attract the “high growth” private investor. A “roll over investment” has no “exit strategy”. It just keeps rolling over to reinvest in” the Fund”. The private investor requires an “exit strategy” in order to realize a profit.

Why would the legislation call this partnership “the Fund”? The answer may lie in the Maine State Constitution, Article IV, which describes legislative powers. Section 14 of Article! V states:

“ Section 14. Corporations, formed under general laws. Corporations shall be formed under general laws, and shall not be created by special Acts of the Legislature, except for municipal purposes, and in cases where the objects of the corporation cannot otherwise be attained; and, however formed, they shall forever be subject to the general laws of the State.”

I submit that the formation of The Small Enterprise Growth Fund through an act of legislation, is unconstitutional, - short of the argument that is premised on the belief that the State of Maine cannot attract high growth investors without bribing them. To that end I submit that the recently passed LD1666 is yet another bribe to attract “high growth” capitalization to Maine. This legislation, combined with LD1, provides “tax credits” for investments in Maine businesses that are approved by FAME. Who does it allot these tax credit to? First to government employees who get a credit of 80 % of their investment, and then, a tax credit of 60% of the investment, to private entrepreneurs, who, as stated in the legislation need not be Maine residents paying Maine taxes in order to qualify for a Maine state tax credit. The LD1666 legislation also states that the same 60% tax credit is available to non-profit organizations, which for the purpose of the tax credit will be treated as taxpayers. The reason this needed to be stated is obvious.

The legislation also identifies who is not eligible for this tax credit, and that would be primarily small business owners of the micro-economy who not only invest their “roll over capital funds” created by their self-generated profits, but also their time and energy and soul in their businesses. Also excluded are any persons related to the owner of the business. It is a long standing tradition that one of the primary sources of micro-economy investment are friends and family, and so this legislation, by offering a carrot for investment in businesses favored by our government, thus stacks the deck against the micro-economy, whose resources are already being taxed to fund the sector which our government has pompously designated as “the creative economy”.

LD1666 was submitted by the president of the Senate and Gubernatorial candidate, Libby Mitchell. I am hoping that gubernatorial candidates will emerge that will campaign on reducing the size of our indebted state government by getting the government out of the business of managing our economy and picking and choosing who gets the benefits and who gets taxed to pay for those benefits. I see no guarantee that investments that are lured to Maine through bribes and which demand ‘exit strategies” are actually here for the long term. “High growth” investors have their personal profits in mind when the business is sold, as is the meaning of the “exit strategy”. A high growth investor will sell to the highest bidder. To my knowledge the 10% taxpayer investor has little say about the “exit strategy”, any more then they have easy accsess to the annual report or the identities of the other investors.

I believe that Maine is capable of attracting investors without bribing them and taxing those lower down on the economic scale to pay for it. Can we bring back honor into our system?


I pay attention to the grass roots political movement, which is against big government and to that end, the focus, is on welfare reform. The legislation that created the SEGF is designed to insure that it’s business takes place behind close doors away from the view of the general public. Every one knows about the welfare system but the general public, by design, is left unaware of the goings on in our Maine State governmental business management system.I hope that in the up-coming election season. This will change.

American Made Exporting

I got a kick out of Obama’s announcement that The United States is going to double it’s exports, which Obama proclaims like pulling a rabbit out the hat. I am sure this is going to be a piece of cake, what with all the taxes Obama is creating or hopes to create for doing business in this country. Not to worry- we have Obama at the helm with his profound academic experience to guide us, but I might feel a smidgeon more confident if Obama would at least make his academic records available to the public since academics is the primary foundation of his expertise.




Oh well, I know that Andersen stoneware is an exportable product but I am not holding my breath for assistance from either the federal government or the Maine State House of Lords- oops, I’m sorry, I meant to say, the Maine State “creative economy”. I have written to our state government on several occasions to inquire if they have information that would help us in this matter but they simply ignore my correspondences. I guess we flunked the “creativity” standards put out by the House of Lords- oops, sorry again, I forgot-the official name is “the creative economy”!



I have been watching our web statistics for a while and have noticed that the countries that visit our site on a regular basis include The Russian federation, Czech Republic, Poland, and China. I wonder what to make of that.



At the rate our administration is going, American made products will have to be exported as upper end items. I think this can be done, a point gleaned from Philip K Dick's novel, The Man in the High Castle. This is a novel about an alternate reality in which the Germans and Japanese won the second world war. The Germans had the East Coast of the United States, The Japanese had the West Coast of the United Staes, and the "fly-over zone", in between, seemed to continue to exist as America.



In this novel collecting "Americana" was all the rage for the japanese. This, to me , symbolozed, that after the demise of the American experiement, it will be longed for and valued. I think there is something to be said for the marketability of products that are representative of American individuality, which differs from other more identifiable cultural arts, suh as tradition American Indian, South American, African, and other cultures.