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Is the three percent surtax back from the dead?

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During the biennial budget battle in 2017 that led to Maine’s first government shutdown since 1991, lawmakers agreed to spend an additional $162 million on k-12 public education to avoid implementing Question 2, a ballot initiative from 2016 that would have imposed a three percent surtax on incomes earned above $200,000 to provide additional support for public education.

Much to the chagrin of talented workers and Maine’s business community, Question 2 is back from the dead in the form of new legislation to be submitted in the 129th Legislature.

According to a piece published by WGME on Thursday evening first titled “Democratic lawmakers prioritize funding education in Maine”, Sen. Ben Chipman of Portland is planning to submit the legislation this session to help state government reach the 55 percent funding mandate for public education costs that we have failed to achieve since its enactment via referendum in 2004.

The question, of course, becomes whether Sen. Chipman’s bill is intended to become the long term funding source of the $162 million in additional education funding we allocated in the last budget, or if majorities in Augusta plan to spend an extra $162 million again, in addition to the new revenues that would be generated under the three percent surtax.

The $162 million is roughly equivalent to what supporters of Question 2 in 2016 said the initiative would raise in revenue, although these talking points changed dramatically throughout the campaign. In the Citizen’s Guide to the Referendum Election in 2016, Citizens Who Support Maine’s Public Schools commented that the surtax would raise $157 million in new education funding. Maine’s Office of Fiscal and Program Review estimated $142 million in new revenues. In their 2017 biennial budget proposal, legislative democrats rather absurdly suggested the surtax would provide an additional $370 million.

If enacted, the surtax from Question 2 was projected to have severe negative impacts on Maine’s economy, including a decrease in private sector jobs of 4,050 by 2021. The increase of Maine’s top marginal tax rate to 10.15 percent would drive high income earners out of the state, particularly those who practice in professions that Maine needs most, like physicians, dentists and surgeons.

The Fiscal and Economic Effects of Question 2 (2016)

20172021
Private sector jobs
-3,970-4,050
Baseline investment-$11 million-$12 million
Real disposable income-$265 million-$293 million
Sales tax revenue-$8 million-$9 million
Personal income tax revenue$132 million$149 million

In addition, the revenues raised from Question 2 would not have been shared equitably among communities in Maine due to the state funding formula for education. The funds raised by Question 2 would have heavily favored wealthy school districts, while dozens of small, rural districts in economically challenged areas of the state would have received no additional funding.

On the campaign trail, Governor Janet Mills promised she would not raise taxes on Maine families in her first biennial budget. However, she has not promised to refuse to raise taxes via legislation. The Maine media should be asking our newly elected governor whether she would sign this legislation if it reaches her desk.

About Jacob Posik

Jacob Posik, of Turner, is the director of communications at The Maine Heritage Policy Center and the editor of The Maine Wire. He can be reached at jposik@mainepolicy.org.

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