LePage proposes under-the-radar corporate tax giveaway

This indefensible idea makes a mockery of the chief executive’s claims of fiscal responsibility.

By Mike Tipping

Over the past couple of weeks, you’ve probably heard a lot about Gov. LePage and his plans for this legislative session. Perhaps you watched his blustery and boisterous inaugural address, or read an analysis of what’s to come in his new budget proposal.

What you probably didn’t hear about, however, is his stealthy attempt to advance one of the most blatantly unnecessary corporate handouts of his governorship.

At 4:09 p.m. on New Year’s Eve, the LePage administration sent out a news release announcing that it would “propose legislation which would conform Maine’s income tax law to federal tax law.” Buried in the fourth paragraph was a note that this package will include “the extension of bonus depreciation.”

Bonus depreciation is a policy that was enacted at the federal level in 2008 as a temporary measure to bolster the economy during the Great Recession. It’s somewhat complicated, but basically it allows large corporations to get an up-front bonus on the amount they deduct from their taxes for wear and tear on equipment and buildings that they’ve just purchased.

The bonus depreciation tax giveaway affects only large corporations – those making purchases of more than $2 million. Smaller businesses making smaller investments are eligible for a different business expense deduction instead.


Thanks to this up-front deduction on their capital spending, along with all the other subsidies they already get for this kind of investment, these large firms are often able to deduct from their year-end taxes more than they actually spent on any new equipment.

There’s significant debate over whether this corporate handout actually does help boost the economy. The available research shows that most corporations just make the same purchases they would anyway and pocket the bonus money.

LePage can’t even try to make this economic argument, however, because his proposed legislation would affect only the 2014 tax year – the one that ended on the day he issued his news release. There is no possible way that his plan will increase business investments in the future, because it rewards only investments that have already been made. It’s an unnecessary windfall for companies that happened to engage in that kind of spending last year.

So how much money is LePage planning to hand over to these corporations? A Maine Revenue Service fiscal impact statement for a similar provision two years ago estimated that it would cost the state $11.6 million in the first year. This is a different year, and the deduction may be structured somewhat differently, but a conservative estimate for the cost of this handout might be somewhere between $6 million and $10 million.

This money would basically be given as an interest-free loan to these corporations – to be paid back, if at all, over the full course of the depreciation of their business assets, which could be decades. If the tax break continued, it would cost that much again every year.


To put those numbers in perspective, that’s more than LePage has claimed to have saved from all of his cuts to public assistance programs put together.

LePage’s cuts to Temporary Assistance for Needy Families – which went into effect in 2012 and cut off support for 3,000 families – saved the state just $2.5 million a year, according to the governor’s own projections.

The cuts to General Assistance for immigrants that LePage made a centerpiece of his re-election campaign are due to affect 1,000 desperate families and save just $1 million, according to his office’s estimates.

To justify these and other cuts, LePage has often claimed that Maine’s budget is stretched to the limit. How then can he possibly justify this kind of handout to corporations, many of them out-of-state, while gaining absolutely nothing in return?

He can’t. This proposal simply can’t be justified or defended. It makes a mockery of LePage’s claims of fiscal responsibility and shows exactly where his true priorities lie.

Short of shoveling cash into a pile and burning it, it’s hard to think of any budgeting decision less intelligent than just giving money away to corporations that were already well enough off to make more than $2 million in capital expenditures last year.

Will the Republican-controlled Senate and Democratic-controlled House stand up for fiscal sanity and work together to block this ridiculous giveaway, or will LePage be allowed to slip it through? What happens could tell us a great deal about what to expect in Augusta over the next two years.




Read All Mike Tipping Blog Posts…

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