Citizens' Initiative

MPA unveils plan to raise taxes on Maine families

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If you (and your wallet) are fed up with progressive tax-and-spend ballot initiatives, don’t expect them to end any time soon.

The Maine People’s Alliance (MPA) announced on Wednesday its newest campaign to raise taxes on top earners and small businesses. The Portland Press Herald reports the group is looking to gather the necessary 61,123 signatures required to move a citizens’ initiative onto the November 2018 ballot.

The ballot question would fund in-home care services for people older than 65 and the disabled, regardless of income. It would be funded by imposing a new payroll tax on workers who earn over $107,200 and their employers and assesses a 3.8 percent tax on non-wage income, including dividends and self-employment income, on incomes earned over that threshold.

Under the initiative, high-income earners and their employers would be required to pay 1.9 percent of the employee’s salary into the “Universal Home Care Trust Fund.” The fund would be used to pay for in-home care and living services for elderly and disabled Mainers regardless of income. Proponents estimate the measure would generate $132 million in new revenue for the fund.

As it stands today, the Social Security payroll tax is only levied on earnings up to $107,200. The MPA’s initiative would partially eliminate this loophole by assessing the payroll tax on incomes earned over this threshold to funnel cash into the Universal Home Care Trust Fund.

The proposal sounds eerily familiar to Question 2 from last November, which assessed a 3 percent surtax on incomes earned over $200,000 to fund k-12 public education. The MPA, along with a coalition of liberal special interest groups, helped fund Question 2 in 2016, which ultimately resulted in Maine’s first government shutdown since 1991. They are also behind the measure to expand Medicaid on this November’s ballot, backed by tens of thousands of dollars from The Fairness Project, a radical liberal group based in Washington D.C.

The minority House Republicans and their majority allies in the Senate stood firm against the 3 percent surtax last year, agreeing to send the additional support to public schools in exchange for the elimination of the surtax. Given that Maine Democrats will demand their $162 million ransom to be renewed each budget cycle, the MPA’s proposal sets up another budget showdown in 2019, as conservative voters will expect their elected officials to again hold the line on another tax increase via referendum.

After seeing their progressive surtax vanish before their eyes, the MPA responded by proposing yet another tax increase on Maine families. Unfortunately, the group has not yet released the language of the proposed initiative, making it difficult to assess its impacts without understanding exactly how the tax is applied by law, outside of the group’s talking points.

What is clear, however, is how detrimental the initiative would be to some of Maine’s highest skilled workers. Despite an employer being legally required to pay 1.9 percent of the employee’s wages under this initiative, it is the the worker who will likely face the brunt of taxation. They will be required to pay their share of the tax on their salary each paycheck, and will likely be paying (at least) a portion of the employer’s share as well, as the employer can deduct this sum from the worker’s earnings to meet the employer’s funding obligation. While this additional taxation does not apply toward the individual income or marginal tax rates, it ensures top earners and their employers will go home with less money each week.

Considering our state’s troubling demographic trends, the tax will apply to the professionals Maine needs most. According to the Bureau of Labor Statistics, there are 24 high-income occupations in Maine that earn, on average, $100,000 or more annually. Over one-third of those occupations are in high-demand in our state, including surgeons, physicians, physician assistants, information systems managers, architects, engineers, pharmacists and general practitioners.

This ballot initiative effectively penalizes both workers for being skilled and employers for attracting talented personnel. As we learned from studies on Question 2 last year, imposing additional taxes on top earners and job creators has troubling economic effects, as reduced investment in Maine’s economy will result in the loss of private sector jobs and diminish real disposable incomes.

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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