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Democrats' budget plan: $400 million tax hike

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Senate President Justin Alfond, D-Portland, and House Speaker Mark Eves, D-North Berwick, unveiled proposed tax increases on Wednesday.

AUGUSTA – Democratic lawmakers announced on Wednesday an alternative to Gov. Paul LePage’s five month old budget proposal that includes more than $400 million in tax increases.

Senate President Justin L. Alfond (D-Portland) and Speaker of the House Mark W. Eves (D-North Berwick) proposed their tax increases during a State House press conference. The plan is outlined in a letter from the Taxation Committee to the Appropriations Committee.

According to the letter, the Democrats’ final budget recommendations include delaying two tax code changes enacted by the 125th Legislature: a reduction in the income tax and an increase in the amount of property exempt from the estate tax.

The estate tax – also known as the “death tax” – is levied on deceased individuals’ estates before any inheritance is dispersed. Republicans in the last Legislature doubled the amount of an estate that is exempt from the death tax from $1 million to $2 million.

Democrats estimate that delaying this increased exemption until at least 2016 will raise $60 million over two years for the state. According to Democratic estimates, repealing the income tax reductions until at least 2016 will raise $350 million in revenue for the current biennial budget.

All told, the “recommended solution” the Democrats have put forward will mean taxpayers pay $410 million more in order to help balance the state budget.

The top four Democrats in the Legislature – President Alfond, Speaker Eves, Senate Majority Leader Seth Goodall (D-Sagadahoc), and House Majority Leader Seth Berry (D-Bowdoinham) – all voted in favor of the same tax policy they are now proposing to delay or repeal.

The Democratic proposal also includes a list of “other options” which they say could serve as alternative budget-balancing measure should repealing the LePage tax cuts prove impossible. The Democrats stressed, “It is not the majority report members’ proposal that all of these options be enacted. Instead, our strong preference is our recommended solutions.”

The optional parts of the proposal include the following: raising the meals and lodging tax to 9 or 10 percent – a move Democrats estimate will raise $120 to $180 million over two years; raising the sales tax to 6 percent, which is projected to increase revenue by $150 per year; and doubling the current cigarette tax, an increase of $1.50 per pack.

In addition, the Democratic proposal recommends enacting “tax equalization,” as outlined in Rep. Berry’s L.D. 1113. Berry’s bill, known in the State House as the Berry-Buffet bill for its similarity to a tax idea espoused by billionaire Warren Buffet, would hike taxes on the “top 1%” of Maine’s income earners. There is not currently an estimate of how much revenue this proposal would raise, but there is general agreement that less than 6,000 Maine residents would pay additional income taxes under the Berry-Buffet rule.

Alfond and Eves said raising taxes is necessary to produce a balanced budget without raising property taxes, but there seems to be some confusion of the Democrats’ part regarding which level of government administers which taxes.

They alleged that the governor’s budget increases property taxes; however, only municipalities have the authority to increase property taxes.

This is not the first time Democrats have baldy asserted that LePage is raising property taxes, and it may be part of a Party-wide strategy to weaken the governor by misconstruing his budget proposal.

Although municipalities could respond to the governor’s proposed biennial budget by raising property taxes, reducing spending is an equally viable way to respond to the suspension of revenue sharing. In no case does a governor have the authority or capacity to raise property taxes.

S.E. Robinson
Maine Wire Reporter
srobinson@mainepolicy.org

About Steve Robinson

Steve Robinson is the former editor of The Maine Wire and currently producer for the Howie Carr Show. Follow him on Twitter @Stevie_Rob or send him an email at Steve@HowieCarrShow.com.

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