Cate Street deal shows danger of crony capitalism

The Great Northern Paper mill in East Millinocket in 1992. Michael York | BDN

The Great Northern Paper mill in East Millinocket in 1992. Michael York | BDN

The ongoing revelations regarding the Cate Street deal, reported on extensively by the Portland Press Herald, were reported as though the failure of the complex tax credit scheme cooked up in Augusta to save a mill should be a galloping shock. However, it should have not only been no shock, it should have been obvious that this plan would be a failure. The question should have been not if the Cate Street deal would fail, but when and how — and how much it would end up costing taxpayers.

This sort of deal has happened before, after all. Though less complex, in 2010 Maine spent over $20 million to buy a railroad line that a private operator was threatening to close. Instead of quickly selling the line or operating it directly, the state turned around and leased it to Maine Northern Railway, a subsidiary of JD Irving. Irving, a multi-billion dollar privately-held Canadian corporation that could have easily afforded to buy the line itself, was thus spared that expense thanks to the taxpayers of Maine.

Given all that, the idea that Maine might end up playing Springfield to Cate Street’s Lyle Lanley should come as no surprise. The only difference between the Cate Street scheme and Lyle Lanley selling Springfield a monorail in “The Simpsons” with the city’s nuclear fallout settlement money is that at least Springfield was lucky enough to have Marge Simpson as a lone voice of reason. Though she was completely ignored, she argued to use the settlement money on traditional infrastructure improvements, like repairing Main Street.

Under the dome in Augusta, there was no Marge Simpson: the New Market tax credit plan sailed through with bipartisan support. That widespread enthusiasm from both parties makes the deal difficult to attack even now, with its failures obvious. Rather than seek to cast blame, then, and turn this into yet another round of gotcha partisan politics, let’s make this an opportunity to improve our state.

Upon closer examination, it becomes increasingly clear that the problem is not just with the New Market tax credit program, but with the concept as a whole. Although tax credits can be effective in certain, limited circumstances, they can also be readily abused by financiers looking to make a quick buck. When the potential beneficiaries hire lobbyists to help create the program, it amounts not just to bad government, but to crony capitalism. This should be an issue that can unite the left and the right in mutual disgust. Government should not be restructuring the economy in order to benefit the few financiers able to game the system.

Thus, when it comes to structuring our tax code, Maine shouldn’t be jury-rigging the system to benefit certain businesses or industries. The proliferation of tax credits has crippled our state tax code, leaving us too dependent on limited revenue streams. Rather than creating these special-interest give-aways, the tax code should be restructured in such a way that it lowers costs for all businesses. Instead of making it cheaper and easier for certain businesses to relocate here, Maine should be trying to make it cheaper and easier for everyone to live and do business here.

Of course, governing this way requires making hard decisions. It requires policymakers to realize that not all industries will last forever. There will be periods of growth and contraction, and of change and reinvention, as the years march on. Instead of desperately trying to restructure the private sector to prop up failing companies or industries, Maine needs to focus on helping the entire economy — and the entire state — to succeed. That’s the true path to prosperity that the people of Maine want and deserve.

Jim Fossel

About Jim Fossel

Originally from Alna, Jim Fossel has volunteered with a number of campaigns over the years, including for Peter Mills for Governor in 2006. He previously worked for U.S. Senator Susan Collins and House Republican Leader Josh Tardy.