AUGUSTA – Giving hope to those who believe democracy flourishes through compromise, Republicans and Democrats in the so-called Gang of Eleven joined forces Wednesday to unveil legislation that would amount to a net tax increase for Maine.
“This is huge,” said Rep. Gary Knight (R-Livermore), top House Republican on the Taxation Committee and lead sponsor of An Act to Modernize and Simplify the Tax Code.
Knight said the goal of his bill is to improve Maine’s archaic tax code and attract businesses to the state. His plan is an attractive one: it cuts Maine’s income tax in half, from eight percent to four, eliminates the estate tax, and reduces the corporate income tax rate from 8.93 percent to 7.5 percent.
However, these tax cuts are accompanied by a drastic expansion of the sales tax, making the bill a net tax increase.
[Recommended: The Devil’s in the Details: What the Gang of Eleven plan will do…]
Under Knight’s bill, the sales tax base would be expanded to apply to nearly all consumer purchases with the exception of health care and education and numerous sales and excise tax rates would be increased.
According to information distributed at the press conference, the plan would raise an estimated $700 million in additional sales and excise tax revenues annually – $400 million by expanding sales tax collection and $300 million by increasing sales and excise tax rates.
While the bill would amount to a net tax increase, supporters believe Maine can “export” the added tax burden to tourists and non-residents. An overview of the bill states, “Because many non-residents share many of the benefits of Maine’s communities, roads, hospitals, environment and quality of life when they are here, while avoiding many of the taxes paid by residents only, the reforms also reflect a fairer apportionment of government costs.”
In order to ensure that the tax code remains progressive, a sticking point for Democrats, the bill would establish a sales tax credit for Maine’s low-income families. In practice, this would amount to a yearly payment from the state to low-income individuals worth up to $1,000.
The Gang of Eleven is comprised of five Democrats, five Republicans and one un-enrolled Democrat: Sens. Richard Woodbury (UD-Cumberland), Seth Goodall (D-Sagadahoc), Roger Katz (R-Augusta), Emily Cain (D-Penobscot) and Reps. Gary Knight (R-Livermore), Lance Harvell (R-Farmington), Mark Dion (D-Portland), Amy Volk (R-Scarborough), Sara Gideon (D-Freeport), Dennis Keschl (R-Belgrade) and Nate Libby (D-Lewiston).
Sen. Roger Katz (R-Augusta), the gang’s top Senate Republican, said Maine’s high income tax hampers efforts to compete with other states for businesses and workers.
“It’s like playing basketball with one hand tied behind your back,” said Katz.
Katz said the bill is good public policy, forged through bipartisan compromise. “This will be a good test for the 126th Legislature,” he said. “Will we look only to the next election, or to the next generation?”
Rep. Amy Volk (R-Scarborough) views the bill as a pro-growth plan that is necessary if Maine hopes to compete with other states.
“We’re seeing companies like Unum move executives out of the state,” said Volk. “Reasonable people understand that the flight of capital and talent from Maine is a problem,” she said.
She said the reduction of the income tax would encourage high-value professionals to live and work in Maine.
Senate Minority Leader Michael Thibodeau (R-Winterport) does not support the Gang of Eleven’s tax increase proposal.
“The Republican caucus is focused on rightsizing government,” said Thibodeau. He said any plan that amounts to a net tax increase is going in the wrong direction.
“The Gang of Eleven is asking the wrong question—it’s not about how we take money from Mainers, it’s about how much.”
S.E. Robinson
Maine Wire Reporter
srobinson@mainepolicy.org
<span class="dsq-postid" data-dsqidentifier="6407 http://www.themainewire.com/?p=6407">27 Comments
My question is this, what process will be put in place to.colkect the increased sales tax from tourists and non- residents, while exempting residents? Seems to me that this
….. scheme will have a negative impact on tourism, which is a vital part of our economy. No, I don’t trust this propisal. No surprise that Cain’s name us attached to this, but I am surprised that Volk’s is.
The net tax increase proposed by the bi-partisan group is not a good thing. From what I have read it does nothing to reduce the size of the state budget, nothing to reduce the size of government, nothing to reduce welfare programs.
I am tired of compromises that ignore our biggest problems.
I am disappointed to see that several Republicans writing and sponsoring this.
I agree with Sen. Mike Thibodeau
If they had any guts they would just collect an entrance fee at the border. Get all the money in one lump sum, they could base it on make of car or camper, towing a boat, snow machines,skis etc. why hide it in more taxes. Just confiscate when they cross the border. Heck they could even wear the Democrat issued clown noses.
my full comment: The net tax increase proposed by the bi-partisan group is not a good thing. From what I have read it does nothing to reduce the size of the state budget, nothing to reduce the size of government, nothing to reduce welfare programs. I am tired of compromises that ignore our biggest problems. I am disappointed to see that several Republicans writing and sponsoring this. I agree with Sen. Mike Thibodeau.
Although I’d like to see an elimination of the income tax, I do think this is a step in the right direction.
It sounds like another tax and spend deal to me.Stop adding and spending!
It’s brilliant! We border a state with no sales tax and we’re going to raise our sales tax higher than it already is and expand it to cover more items. Brilliant! Anyone who thinks this isn’t the answer to our problems is just being negative. Consider all the extra money we’ll get from the Feds for all the extra people going on food stamps! You know; all those convenience stores, auto mechanics, barber shops, beauty shops, etc., etc. within 50 miles of the New Hampshire border that will be going out of business as people take their money to tax free New Hampshire. What a great idea! And I’ve had the privilege of witnessing this kind of genius in my lifetime! It’s brilliant!
Shear stupidity!
What is to stop these fools a year/s from now, after they discover their failure, and raise the income tax back to 8% while still having all that sales tax increases.
How much will legal services be taxed?
after 54 years in Maine, we left 2 years ago for the no income tax state of TN and don’t regret it for a minute. long summers and mild winters also. get out now if you can.
I’m sorry that I have to say that usually gangs don’t do anything that’s positive for everyone that’s not in the gang.
6%
By exporting more of our tax burden to non-Maine residents, well over 90% of Mainers will see a net reduction in their overall tax burden. The 4% income tax rate will create much more incentive for capital investment in our.
state. I only ask that people look at the plan as a whole, and not just pick away at bits and pieces.
eliminating the Estate Tax, coupled with a reduction in Personal Income to 4% we will keep people here – no more 6 months and day. These changes will have a profound positive effect on charitable donations (because when they are here, they donate here), the ability for families to pass down their businesses to their children. These two things alone will make Maine a much better place. Bravo Roger! Let’s do this.
I give you an A for trying!
Behind you 100%
what is the new tax amount going to be?
on goods and such
I will be doing more shopping in New Hampshire.
Please come and shop in New Hampshire. It is the home of Live Free or Die and the home of the Free State Project.
And when the tourism industry does not bring in the expected tax revenue because people will vacation someplace cheaper, then what? Mainers will never see these so-called beneficial tax cuts for residents because the projected revenue from “out of state” sources will never materialize…
Perfect! We already can’t afford our grocery bill! And, we don’t qualify for state aid… so how will this help the former middle class that is now the upper lower class? Too much income to qualify for aid and not enough to more than “just get by” Stop spending our money on luxuries like meat and potatoes? Or maybe toilet paper and laundry soap?
jooouli
you will love it
don’t regret it