After Senator Susan Collins voted for the Senate tax plan, some Mainers took to the streets in protest. They claimed Sen. Collins had “turned her back” on Maine and warned the bill “targets seniors and small businesses.”
Those assertions are factually incorrect – and deeply unfair. The tax plan will jumpstart Maine’s economy, boost wages, and spur job creation. And Sen. Collins successfully fought for several changes to the bill that will benefit Maine. She took a good bill and made it even better.
The Senate tax bill is based on a simple principle. When people and businesses can keep more of their money, they spend and invest it. That spurs economic activity that benefits all Mainers.
To put more money in Mainers’ pockets, the bill slashes individual tax rates. It doubles the value of the child tax credit from $1,000 to $2,000.
And it nearly doubles the standard deduction – which benefits the 6 out of 10 Maine taxpayers who don’t itemize deductions on their tax returns. For individuals, the bill will boost the standard deduction from $6,500 to $12,000; for heads of households, it will increase it from $9,550 to $18,000; and for joint filers, it will raise it from $13,000 to $24,000.
Every income group will enjoy a tax cut in 2019, according to an analysis by the Washington Post – hardly a conservative outlet.
Sen. Collins amended the original bill to bring additional relief to Maine taxpayers. She forced Senate leaders to allow people to deduct up to $10,000 in state and local property taxes off their taxable income. The Senate’s draft bill would have eliminated the state and local deduction.
Maine has relatively high property taxes, which raise $2.4 billion in funding for school districts, police departments, and other government services. Property taxes generate 45 percent of all government revenues in Maine – double the share of revenue from sales taxes.
Eliminating the deduction could potentially have raised taxes on the 28 percent of Mainers who claim the state and local deduction. That could have put pressure on local governments to slash property taxes – putting public services at risk.
Sen. Collins also sponsored an amendment to benefit Maine seniors. Under current law, people can deduct medical expenses that are greater than 10 percent of their adjusted taxable income. Many seniors depend on this deduction to afford long-term care in nursing homes.
The House bill would have axed this deduction. Sen. Collins not only preserved the tax break – but actually expanded it. Thanks to her advocacy, people will be able to deduct medical expenses greater than 7.5 percent of their income.
The Senate bill gives a big tax cut to small businesses. Most small firms are organized as LLCs and partnerships. Owners pay taxes on business profits through their personal tax returns. These owners will be able to deduct 23 percent of business income off their taxes under the Senate bill. That will free up money to hire new workers and expand operations.
The bill also slashes corporate income taxes. The federal government currently taxes businesses at a top rate of 35 percent – the highest in the developed world. This puts American businesses at a major international disadvantage and suppresses wages.
That’s not just a Republican talking point. In a recent letter to Congress, nearly 140 economists from across the political spectrum agreed that a lower corporate rate “is the key to an economic engine driven by greater investment, capital stock, business formation, and productivity — all of which will yield more jobs and higher wages.”
Even President Obama even sought to cut the corporate tax rate. He called the current corporate tax system “outdated, unfair, and inefficient.”
The Senate bill would set the corporate rate at 20 percent. With less money going to taxes, Maine businesses would have ample resources to hire additional workers, raise wages, and invest in new, growth-creating ventures. Harvard economist Martin Feldstein expects the reform will increase national income by $500 billion annually. The Tax Foundation, meanwhile, estimates the bill would boost long-term economic growth by 3.7 percent.
Sen. Collins’ vote in favor of tax reform indicates the bill has much to offer our state. Those claiming that Sen. Collins “turned her back” on Maine are simply wrong – the bill will boost Mainers’ after-tax incomes and spur job creation while protecting seniors and public services.