By David Sorensen
Maine Republican Party
The 125th Legislature of 2011-12 passed the largest tax-cut package in Maine’s history as a part of the biennial budget, LD 1043. Democrats have been railing against this package in the editorial pages, calling it a tax cut for the rich. They leave out two facts that destroy their credibility.
First, they voted for it. The budget passed 123-19 in the House and 29-5 in the Senate. They did so reluctantly, however, with House Minority Leader Emily Cain eventually commenting, “My caucus hates these tax cuts. It hates them.”
Second, the Democrats’ own tax package, enacted by LD 1495 in 2009, gave an average $6,238 tax cut to 5,000 Mainers earning over $333,000 per year, while raising sales taxes on everyone, hitting the lower- and middle-class especially hard by penalizing such things as car repairs and meals.
This was not real tax relief, but a tax-shift gimmick that was repealed as such by the voters in 2010.
Republicans, on the other hand, delivered real reform. Specifically, the Republican tax cut package of 2011:
• Changes the four old income tax rates, which were 8.5%, 7%, 4.5% and 2%, to three rates at 7.95%, 6.5% and zero percent;
• Raises the amount of income exempt from income taxes from the first $21,000 to the first $35,750;
• Raises the death tax exemption level from $1 million to $2 million (federal is $5 million), helping small businesses and family farms;
• Creates the New Market Investment credit, which encourages development in economically distressed areas of the state;
• Conforms to the more generous federal deduction for married couples filing jointly;
• Eliminates the tax on lump-sum retirement plan distributions;
• Eliminates the Alternative Minimum Tax (AMT);
• Exempts meals provided at nursing homes from the sales tax;
• Refunds the sales tax on fuel used for commercial fishing;
• Provides an income tax credit for investment in fisheries infrastructure;
• Exempts the sales tax on aircraft and parts, to aid development of the former Brunswick NAS;
• Exempts bags provided at redemption centers from sales tax; and
• Restores the Business Equipment Tax Reimbursement (BETR) program.
The effects of these changes are significant:
Over $150 million will be returned to taxpayers over the biennium—an average of $115 for every man, woman and child in Maine—or $577 for a family of five.
About 460,000 households will see an average cut of $337.
Approximately 70,000 Mainers will no longer pay income taxes.
The Beacon Hill Institute at Suffolk University calculated that the tax cuts will generate at least 3,700 jobs by 2015 and increase Mainers’ disposable income by over $270 million.
The 80 percent of taxpayers in the low- and moderate-income groups pay only 24 percent of the state’s total income tax revenue, but will receive 33 percent of the cuts.
A family of four with an AGI of $50,000, using the standard deduction, will enjoy an income tax cut of $300—a 24.4 percent reduction.
Despite a $994 tax cut in 2012, the richest 10 percent (over $119,000) will see their share of total income taxes collected rise from 55 percent to 57 percent, while the percentage of the burden paid by all other income groups will decline.
Middle-income families can expect a cut of about 15 percent, while families in the top 10 percent will see an average reduction of 8.4 percent.
As you can see, the Republican-led tax cut package of 2011 is not slanted toward the rich. But it does benefit all Mainers by providing real tax relief that puts more money into the pockets of hardworking Mainers and more money into the private sector economy.
This is what Republican legislators promised on the campaign trail in 2010, this is what they delivered, and this is what they will continue if given majorities again in the 126th Legislature of 2013-2014.
David Sorensen is the communications director for the Maine Republican Party. For more information, see www.mainegop.com.