There has been plenty of legislation proposed this session that would increase taxes on Maine citizens, including new taxes on heating fuel, carbon, gasoline, diesel fuel, tobacco, alcohol and much more. This makes it refreshing when lawmakers consider legislation that would actually reduce taxes; these bills seem few and far between this session.
Lawmakers on the Taxation Committee today will hold a public hearing on LD 1292, a measure that proposes to reasonably and incrementally decrease all state individual income tax rates over three years, with the largest cuts going to earners in the bottom income tax brackets. The bill would reduce the lowest rate from 5.8 percent to 5 percent; the middle rate from 6.75 percent to 6 percent; and the top rate from 7.15 percent to 7 percent.
LD 1292 provides tax relief to Maine citizens while addressing concerns that have been raised in the past related to reducing or eliminating individual income in Maine.
Maine’s top marginal individual income tax rate is one of the highest in the nation at 7.15 percent. According to the Tax Foundation, Maine has the 11th highest top marginal individual income tax rate in the nation. By reducing the individual income tax burden, particularly on low- and middle-income Mainers, the state of Maine would be more competitive with other states and able to attract the workers and job creators we need to grow our economy.
In March, lawmakers on Taxation Committee held a public hearing on LD 107, a bill that would incrementally reduce Maine’s individual income tax to zero. The committee rejected the measure and several groups questioned the merits of such a proposal. The Maine Center for Economic Policy, for example, testified that “eliminating a state’s progressive income tax is the surest way to create an upside-down tax system – one where those with the least income pay the highest share of their income in taxes.”
LD 1292 provides relief at all income levels but reduces the bottom two rates the most in effort to target relief to low- and middle-income earners. Low-income Mainers would see their rate reduce by 14 percent, middle-income earners would realize an 11 percent drop and the highest earners would see the top rate slashed by roughly three percent.
Approximately 500,000 filers would be affected by the change in the lowest and middle income tax brackets. In other words, the bill does not give a disproportionate tax break to the “wealthy” (keep in mind an individual needs to earn only $51,700 or more to pay the top marginal rate in Maine).
The State of Maine is fortunate to have more than a $120 million surplus from the 2018-19 budget that will be carried over into the 2020-21 biennium. In addition, the Revenue Forecasting Committee has projected the state would bring in over $7.9 billion in revenue over the next two years (with the governor’s proposed adjustments).
The last state budget was approximately $7.2 billion. While a slight increase in spending might be justifiable depending on policy priorities and the rate of inflation, there is no reason the state cannot also give relief to taxpayers.
The state is projected to bring in an additional $550 million in the 2020-21 biennium. In addition, Gov. Mills stated in her State of the Budget Address that the Revenue Forecasting Committee has projected revenue could exceed $8.3 billion beyond the 2020-21 biennium.
There are plenty of resources to adequately fund state government while giving small, incremental tax cuts to hardworking Mainers based on these projections. The time is now, when it is economically possible, to lower the tax burden on Maine people.