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Originally published in the Maine Beacon on March 24, 2023
In a bid to fund education programs and ensure that the state has revenue to meet myriad unmet needs, Democratic lawmakers are pushing for two bills that would make the wealthiest Mainers pay what they see as their fair share in taxes.
Those two bills were heard during a public hearing Thursday before the legislature’s Taxation Committee.
One of the measures, LD 843, sponsored by Rep. Laurie Osher (D-Orono), would establish an additional income tax bracket in Maine with a tax rate of 11.15%. That rate would apply to income in excess of $125,000 for single filers, income in excess of $150,000 for heads of household, and income in excess of $250,000 for married couples filing jointly.
Maine’s current top tax bracket is 7.15%, and single filers pay that rate on income in excess of $58,050, heads of household pay that on money in excess of $87,100 and joint filers pay that rate on income over $116,100. That is the result of action taken by former Gov. Paul LePage, who pushed to lower the top income tax rate from 8.5% in a move that has cost Maine hundreds of millions of dollars in revenue and has resulted in low and middle income residents being hit harder by property taxes while the wealthy primarily benefit from the lower income tax rate.
The other bill lawmakers heard Thursday was LD 667, sponsored by Rep. Ben Collings (D-Portland). That measure would establish a surcharge of 3% on income in excess of $1 million and a 6% surcharge on income in excess of $10 million. The bill would require that 75% of the revenue generated from the measure go to funding K-12 education and 25% of the funds be spent on rural economic development.
The measures are being introduced at a time of stark income inequality across the country, with the richest 1% making 84 times as much as the bottom 20%. Further, rising corporate profits have contributed disproportionately to inflation in yet another example of the wealthy doing well during the COVID-19 economic recovery while working class people struggle.
Raising money to pay for unmet needs
Speaking in favor of his bill to generate money for education and rural economies, Collings noted that every year crucial programs and initiatives aren’t able to be funded in the budget due to a lack of revenue. LD 667, he said, would provide money to ensure that programs that help address the needs of Mainers can be paid for, setting the state up to succeed going forward.
“Education and rural economics are vital for our future and vital for our economy,” he said.
Collings also noted that a majority of Mainers voted in 2016 to create a 3% tax on income over $200,000 to pay for education programs — a policy that was subsequently repealed by the legislature. He argued that the referendum shows Maine people support tax fairness policies.
In presenting her bill, Osher noted that income tax is the fairest form of taxation. In other forms of taxation, such as sales tax or property tax, low-income people end up getting hit hardest in terms of the percentage of their wealth that they pay. But progressive income tax reflects the differences in people’s finances, with wealthier people paying more and lower-income people paying less.
But Maine’s current income tax code doesn’t truly reflect that policy goal, Osher said, pointing out that middle-income people are treated the same as wealthy people.
“When it comes to fairness, Maine’s current income tax structure misses the mark,” Osher said.
Osher said her bill would address this issue while also generating revenue to pay for items such as education programs, initiatives to help adults with disabilities, and behavioral health care and other programs that have long gone underfunded.
Maura Pillsbury, an analyst with the Maine Center for Economic Policy (MECEP), testified in favor of both Osher and Collings’ bills. Pillsbury said the issue comes down to fairness and prioritizing the needs of those who are truly struggling.
“Raising top income tax rates will allow us to fund important needs and priorities,” she said. “Under our current tax code, millionaires pay the same income tax rates as middle-class families. We urge you to make Maine’s tax code fairer by increasing taxes on top earners.”
Mills among opponents of bills
The Mills administration is opposed to both tax fairness bills. Michael Allen of the Department of Administrative and Financial Services submitted testimony on behalf of the governor, who has pledged not to raise taxes. Allen said the bills are unnecessary given the state’s short-term budget surplus, which advocates have argued is not actually a surplus given the longstanding deficit the state faces in meeting Mainers’ everyday needs.
The administration also said the bills would make Maine among the states with the highest tax burden in the country and argued that the measures could result in higher-income earners departing Maine for lower-tax states. However, that argument is not borne out by research, which shows that lower taxes for millionaires in more conservative states and higher taxes in more liberal places haven’t spurred the rich to move to red states in large numbers.
Others also submitted testimony in opposition to the bills, with Nick Murray of the Maine Policy Institute arguing that, “Raising income taxes further will not help the state or its citizens. Both LD 667 and LD 843 would move Maine in the wrong direction, driving a larger wedge between the people and prosperity.”
However, Jeff McCabe of the Maine Service Employees Association noted that the state is facing a crisis in terms of being able to provide key services for its citizens and that the wealthy can afford to pay more to help rectify the situation.
“We pay taxes for critical services that benefit all of us,” he said. “Our public schools and colleges, roads and bridges, public safety, parks, clean water and the safety net protecting our children and seniors are just a few of the services we all count on. The revenues we raise through taxes ideally would provide the conditions for Maine communities to be places where we can all live, work, raise our families and, someday, retire with dignity in our own homes.”
Along with the two progressive taxation bills, lawmakers on Thursday also heard testimony on a Republican bill to phase out the income tax over five years, an idea that research shows would enrich the wealthy while hurting the poor, as municipalities would likely be forced to raise property taxes to make up for lost revenue. Furthermore, lawmakers brought up the point that the proposal would devastate the state budget, as nearly half of general fund revenue comes from state income taxes. As a result, initiatives such as the state funding 55% of education, municipal revenue sharing, and the MaineCare program would be much more difficult to pay for, MECEP said in its testimony.
Republicans on Thursday also pushed for a bill to use excess state revenue for income tax “relief” that advocates said would serve to squirrel away money rather than using such funds to address various problems in the state.
Evan Popp studied journalism at Ithaca College and interned at the Progressive magazine, ThinkProgress and the Reporters Committee for Freedom of the Press. He then worked for the Santa Fe New Mexican newspaper before joining Beacon. Evan can be reached at email@example.com.