One of the major criticisms of the proposed "Act to Modernize the Tax Laws" under debate this week and next in the Legislature is that it's not tax reform -- it's nothing more than a tax shift. The state income tax goes down by the same amount sales tax goes up -- "revenue neutral" in bureaucratese.

And it's true. And it's false.

It is a tax shift. But it's also tax reform and even a little tax relief.

It's not a bold bill, but it does represent progress. If it passes and is signed by Gov. John Baldacci it will be a case of "the art of the possible" -- the very definition of good politics.

The bill lowers the state income tax rate from 8.5 percent to 6.5 percent. The resulting lowering of state revenue is made up by expanding the lists of services subject to the 5 percent sales tax and raising the meals and lodging tax from 7 to 8.5 percent.

Since a good part of the lodging and meals tax is paid by visitors, some of the shift to the lodging/meals tax ends up producing a tax reduction for Mainers. Also, the tax credits that replace the standardized and itemized tax deductions in the bill favor Maine residents vs. nonresidents who file a Maine income tax return.

The Maine Revenue Service estimates 95 percent of Maine residents will see a reduction in their income tax and, when the sales tax increase is factored in, 85 percent will still see an overall tax reduction. The reduction isn't huge: on the average, $175 per year.

But it is still a reduction and will head the state in the right direction after years of failed attempts at tax reform. It is especially welcome because it reduces the payroll tax. In every paycheck, Mainers would see a little more in their "take home." This is an immediate advantage for household budgets, for the local economy and our attitudes about Maine taxes. And attitudes can't be ignored: many economists say the psychology of money is an important factor in spurring the economy.

There are many technical issues with the bill, some of which have been resolved, and we expect others will be debated and perhaps amendments proposed to deal with them.

But the one philosophical objection we've had to the bill involves the hypothetical case of what the state would do in the event the economy rebounds strongly one of these years and the increase in sales tax revenue is greater than the reduction in the income tax revenue. That could end up creating a windfall for the state general fund -- and a temptation to expand state spending.

We can just hear the calls now for "restoring" the programs that were cut this year, when a bad economy forced the Legislature to make the kind of cuts it should have made in previous years.

Fiscal conservatives and moderates say their experience with the Maine Legislature has taught them that the default mode is to say "yes" to requests from interest groups to expand and add programs. They are not far off the mark.

So we and others had hoped there would be way to fashion the tax bill to ensure that the better part of a windfall was diverted from the general fund and placed in the rainy day fund or used to further lower taxes or perhaps used creatively to improve the state's economy. For example, using the "excess" to freeze tuitions at state universities, where tuition increases have far exceeded inflation.

But an amendment of that sort would compete with the spending limit portions of Tabor II and cause political confusion at a key stage in the bill's progress.

There is a provision in the bill requiring the Taxation Committee to review a report that determines if the results after one year show an equalization between the taxes. If they don't and there is "extra" sales tax revenue, the Legislature can -- and probably should -- use the money on something other than spending.

House Minority Leader Rep. Josh Tardy, R-Newport, has said of the proposal, "It's the wrong plan at the worst time."

House Majority Leader Rep. John Piotti, D-Unity, has said, "It is the right thing to do for the whole state."

A nonpartisan summary would be something like, "It's a pretty good thing to do for most Mainers and we should do it now so they can benefit from it as soon as possible."

Editorials represent the opinion of the Editorial Board of this newspaper: Publisher John Christie, Executive Editor Eric Conrad and Opinion Page Editor Naomi Schalit.