In Depth

Gov. LePage Releases Biennial Budget Proposal

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Gov. Paul LePage released his $6.8 billion biennial budget proposal Friday, which calls for the elimination the death tax, 500 state-level jobs, overall reduced government spending and the transition to a flat income tax rate of 5.75 percent by 2020.

Along with cutting 500 jobs in state government, the budget proposes statutory limits on government growth and spending, coupled with a vacancy study to further reduce the state government workforce.

Evident in the proposal is LePage’s desire to continue reducing the burden on Maine taxpayers, which he offers to tackle by abolishing the death tax and restructuring Maine’s income tax.

By passage of Question 2 in November, Maine’s top marginal tax rate is scheduled to increase to 10.15 percent this month, the second highest rate in the nation. In his budget, LePage requests the state delay the effects of Question 2 for a full year.

LePage’s proposal simplifies Maine’s tax code to a two-rate system of 5.75 percent and 6.15 percent for 2018 and 2019, then diminishing to the flat rate by 2020. It also cuts the corporate income tax rate from 8.93 percent to 8.33. The changes are intended to improve Maine’s economic competitiveness and foster a long-term, business-friendly environment for job creators

By eliminating the state’s death tax, or estate tax, by Jan. 2018, LePage aims to preserve the livelihoods of multi-generational family companies that provide jobs in rural Maine. If enacted, Maine would become the sixth state since 2013 to eliminate the tax, following North Carolina, Ohio, Indiana, Tennessee and New Jersey. Only 18 states currently enforce this tax.

LePage also offers a number of services to Maine’s elderly, incorporating a $400 property tax credit for residents ages 65 and older who earn less than $20,000 annually through the Property Tax Fairness Credit.

The budget rejects Medicaid expansion and shifts MaineCare spending to reflect a priority on elderly and disabled Mainers. MaineCare eligibility will be eliminated for able-bodied parents who earn over 40 percent of the federal poverty level. This move would make 40 percent of MaineCare spending account for elderly and disabled Mainers.

In education, the existing state funding formula would be scrapped to redirect state funds toward direct instruction and teacher salaries, enabled by a statewide contract. In step with his executive order regarding school consolidation earlier this week, LePage’s budget offers incentives for regionalization of school districts throughout the state and provides increased funding to the University of Maine System, Maine Maritime Academy and the state’s Community College System.

The proposal includes the creation of the stand-alone Department of Technology Services, which would serve to oversee executive branch technology assets, provide cyber security leadership to the state and assist in modernizing the state’s information technology capabilities.

In stark contrast with state law, LePage’s proposal allows municipalities to collect service charges from non-profits and land trusts, which are currently tax-exempt organizations in Maine.

LePage’s budget also plans to deposit $40 million into Maine’s Budget Stabilization Fund (BSF), or the state’s rainy-day fund, increasing the fund’s total to $163 million. The BSF was zeroed before LePage took office.

As his last biennial budget proposal, LePage seeks to secure Maine’s long-term economic future and provide enhanced assistance the state’s most vulnerable citizens.

“My budget sends a message that we are cutting taxes, we welcome professionals and small businesses and we want working people to keep more of what they have earned,” LePage wrote in a briefing on his proposal.

LePage and lawmakers will spar over the two-year budget proposal in the coming months. The budget must be approved by June 30 to avoid government shutdown.

The full biennial budget proposal can be viewed here.

About Jacob Posik

Jacob Posik, of Turner, is a policy analyst for the Maine Heritage Policy Center. He can be reached at jposik@mainepolicy.org.

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