On June 8, you will have a chance to help both yourself and Maine by voting “no” on Question 1.

In 2009, after the Legislature passed the first major overhaul to Maine’s tax code in 40 years, opponents of the law gathered signatures to place it on this June’s ballot. A “no” vote is needed to let the law be implemented.

The question on the ballot is this: “Do you want to reject the new law that lowers Maine’s income tax and replaces that revenue by changes to the sales tax?”

If a “no” vote prevails, 95 percent of Maine residents will see an income tax reduction, and 88 percent of Mainers will see an overall tax reduction (once both income and sales taxes are included).

This new law reduces the overall tax burden on Maine residents by $54 million, putting that money in the pockets of Mainers during a time when people really need it.

But it’s important to understand how this law does more than reduce the tax burden. The bill creates a new tax code that would bring in the same amount of state revenue, but do so in a smarter way that would simultaneously spur economic development and help stabilize state revenues, as well as lower residents’ tax burden. A final goal was to do it all fairly, so Mainers of all incomes would benefit.

Spurring economic development

Maine’s relatively high level of personal income tax hurts existing businesses, since about 90 percent of Maine’s businesses are sole-proprietorships, partnerships, or S-corps where taxes are paid by the individual. Beyond this, the extremely high top rate (8.5 percent) is a major deterrent to attracting new businesses and recruiting new employees at existing firms. Moreover, our capital gains taxes are also paid at the 8.5 percent rate, and this limits business investment and can really hurt small-business owners when they sell.

The new law lowers the top income tax from 8.5 percent to 6.5 percent (on income under $250,000) and to 6.85 percent (on income more than $250,000). But most Mainers will pay far less than 6.5 percent, due of a system of new household credits. In total, more than 95 percent of Mainers will see a cut in income taxes.

Stabilizing state revenue

The law also helps reduce the volatility of state revenue. Maine’s existing tax system results in wild fluctuations. When times are good, the state rakes in capital gains taxes at 8.5 percent. When a recession hits, our sales tax revenues plummet, because we have such a narrow tax base. Maine taxes only 24 out of the 160 categories of items taxed nationally. In good years, about 35 percent of our sales tax revenue comes from just two items: new cars and building supplies.

Expanding our sales tax base is like diversifying a stock portfolio. It will produce greater stability, cushioning some of the pain in a recession, and minimizing the kind of tough cuts the state has needed to make over the last few years (including state cuts in aid to education that end up increasing our property taxes).

The new law expands the sales tax in three principal areas: amusements and recreation, repair services (which includes car and appliance repair, but not building repair), and personal property services (which include a hodgepodge of items like pet grooming and storage units).

I’ve heard many complaints that these taxes are paid principally by Maine people, and that some can’t afford new taxes. Don’t forget that under this new law Mainers will be getting more money back than they will be paying in any new sales taxes.

The reasons to do this are compelling: If we don’t expand the sales tax base, we will be resigning ourselves to the same unstable stream of state revenues that creates such problems. We will also be losing some opportunities to reduce our own tax burden (because some of these taxes hit tourists and all of them hit non-residents who live here several months out of the year).

Helping our own

Under the new law, Maine residents will pay $107 million less in income taxes, while paying $53 million more in sales taxes. So Mainers will see a net tax reduction of $54 million.

This benefit occurs, in part, because the new household credit only flows to Maine residents, but also because a good portion of new sales taxes will be paid by non-residents and visitors.

This kind of “exporting” of tax burden is common in many states; and in Maine’s case, it is more than fair. Many people live in Maine less than half the year because they want to maintain official residency in another state where income taxes are less.

Yet because Maine has relatively low sales taxes (our tax rate is lower and our tax base is narrower than many states), these people get tax breaks here that they don’t get in the state where they are residents.

So on the one hand, Maine’s high income taxes push people to seek residency elsewhere, while and on the other hand, our sales taxes are often lower than the states to which these people flee. So these nonresidents get the best deal around — all at the expense of Maine residents.

Tourists will pay more under the new law, principally because of the expansion of the sales tax to amusements and because the meals and lodging tax goes from 7 percent to 8.5 percent. But most tourists are still getting a better deal here than in their home states. And at 8.5 percent, there is no evidence that Maine’s meals and lodging tax will reduce sales. (Vermont saw no impact when it raised its rate to 9 percent a few years ago.)

In addition, the new law pumps additional funding into tourism promotion, which is a proven way to increase business within the hospitality industry.

Some people question the wisdom of expanding a tax that is also paid by residents, but they are missing how this system works. Forty percent of Maine’s meals and lodging tax is paid by nonresidents. That means under the new law, a full $1 in benefit flows back to Mainers for every 60 cents Mainers pay in meals and lodging tax. It is only by exporting the tax burden to nonresidents that we receive the funds to lower the burden on residents.

Doing it fairly

The new law shares benefits fairly. Each income group pays essentially the same proportion of taxes it does now; but because the tax burden on Mainers will be lowered by $54 million, every group wins — whether low, middle, or upper income.* Higher-income people do receive more money back, because they pay more in taxes; but low- and middle-income people receive a larger percentage decrease. In fact, the resulting tax system is slightly more “progressive” than the current code. Low- and middle-income Mainers will see their overall tax burden (including both sales and income taxes) drop by about 20 percent.

*NOTE: Maine Revenue Services estimates that some of the lower-income persons who are eligible to receive a refundable credit may not apply for it, particularly in the first year when the law is new. This could lower the overall tax reduction to about $50 million. Yet even if this happens, the vast majority of lower income Mainers will still see significant tax savings.

“Fairness” does not mean that every individual taxpayer will come out ahead. A small percentage of Mainers may end up only breaking even, or even paying more tax. (I’ll provide details about where and why this happens in my next installment.)

But overall, the new law provides tax relief for most Mainers, while creating a better economic climate for all.

Economists praise the new law because it will boost the economy and create jobs. The State Chamber, Portland Chamber, Bangor Chamber, and Androscoggin Chamber all support it, as do the Maine Municipal Association, AARP and a diverse array of other groups.

Given what the law does (help our economy, lowering resident tax burden) and how it does it (without reducing state revenues, and by providing significant relief to low- and middle-income persons), it sounds like something that both Republicans and Democrats could come together to support.

But politics is a funny thing. What should have been a bipartisan step forward became a Democratic priority, bravely supported by a sole Republican (Sen. Peter Mills).

It’s interesting to review the legislative history. The law that passed in 2009 is the outgrowth of an extremely thorough and transparent legislative process that began in 2007, when I chaired the Tax Committee.

At that time, four out of five Republicans on the committee supported the bill, but Republican legislative leadership subsequently made defeat its priority, and the bill failed in the closely divided Senate.

The new bill that emerged in 2009 was immediately partisan; but fortunately, that partisanship was mostly inside the Statehouse. Dozens of business leaders and other citizens — both Republicans and Democrats — were engaged in the process, and they pushed for passage of the new law.

It amazes me to hear the misstatements about this law. It seems that once some people decided it made political sense to oppose it, they forgot about truth. People who should have known better have said publicly that the law does many things it doesn’t, such as taxing haircuts, electricians and Social Security. In my next installment, I will provide responses to some of the latest misinformation being circulated.

In the meanwhile, here is something for you to ponder: If someone offered you $1.07, but said it would cost you 53 cents, would you take it? Well, that’s exactly what’s happening here, except the benefit is multiplied 100 million times. And beyond that, implementing this new law will not only provide this direct financial benefit, but also help our state in broader ways, like creating jobs.

Maine cannot afford to let this opportunity pass us by, especially now, when we so need it.

Rep. John Piotti just finished his fourth term in the House of Representatives, his first as House Majority Leader. The past chairman of the Taxation Committee, he is the executive director of the Maine Farmland Trust. He holds three degrees from MIT in engineering, public policy and management.