Plan for universal health care in Maine calls for massive tax increases

The 129^th Maine Legislature’s Health Coverage, Insurance and Financial Services Committee met Monday to hold its fourth interim meeting since the conclusion of the first session as members work to wrap their heads around health coverage and insurance markets in Maine.

The committee began its work in the legislative offseason by reviewing the recommendations of the Task Force on Health Care Coverage for All of Maine. The task force was established in the last legislature to devise a scheme for providing some form of health insurance coverage for all Maine citizens. To that end, the committee’s work Monday included discussing the applicability and feasibility of establishing a state-level universal health care program.

Monday’s meeting featured James Myall, policy analyst at the Maine Center for Economic Policy, who briefed the committee on a plan the center created, on behalf of Maine AllCare, to ensure universal health coverage in Maine. The plan eliminates private insurance, creates a state-level individual mandate to purchase health insurance and requires massive tax increases across the board. It’s worth noting that MECEP does not endorse the plan it created for Maine AllCare.

Under the framework, all Mainers with existing public coverage would keep their current coverage while more than 600,000 Mainers with employer-sponsored health insurance would lose their plans and be pushed into a public program. Some individuals who purchase insurance through healthcare.gov would be pushed into Medicaid or the new state-based program.

The estimated cost of the proposal is $6.2 billion, but after including federal funds and supposed state savings, the plan comes in around $4.8 billion in net cost on Maine’s general fund. As the note reports, this represents “a significant increase in state spending through the General Fund,” which translates to a significant increase in state taxes.

To pay for universal health coverage, the plan calls for significant tax increases in several different areas. It establishes two new individual income tax brackets: one of 10.15 percent for annual earnings above $200,000 and another at 12.15 percent for annual earnings above $500,000.

Along with the two new brackets comes new payroll taxes for employers and employees, the elimination of several existing deductions, and retirement income would be counted as regular income for income tax purposes.

It also increases the meals tax from 8 percent to 12 percent, the lodging tax from 9 percent to 12 percent, excise taxes on tobacco and alcohol, and reduces the estate tax exclusion to $1 million. The following is an overview of all taxes encompassed in the proposal:

• Estate Tax to pre-2012 levels ($35 million in revenue)
  • Back down to $1 million as the exclusion (currently $5.6 million)
• Premium as a percent of income ($1.9 billion in revenue):
  • Families below 138 percent of federal poverty level (FPL) would pay nothing (same as current Medicaid recipients)
  • Families between 138-399 percent FPL would pay between 2 and 5 percent of household income
  • Families between 400-499 percent FPL would pay between 5 and 6 percent of household income
  • Families between 500-599 FPL would pay between 6 and 7.5 percent of household income
  • Families at or above 600 FPL would pay 7.5 percent of household income
• Employer Premium ($1.8 billion in revenue):
  • Businesses with fewer than 10 employees would pay coverage fee equivalent to 3 percent of payroll
  • Businesses with 10-99 employees would pay a coverage fee equivalent to 4.5 percent of payroll
  • Businesses with more than 100 employees would pay a coverage fee equivalent to 10 percent of payroll
• Income Tax ($416 million in revenue):
  • 10.15% bracket for couples who earn more than $200,000
  • 12.15% bracket for couples who earn more than $500,000
  • Elimination of “obsolete state tax deductions for medical deductions, health savings accounts, and self-employed health insurance costs; elimination of all other itemized deductions on state income taxes; and counting retirement income as regular income for income tax purposes.”
• Meals and Lodging Sales Tax ($142 million in revenue):
  • Prepared Meals would increase from 8% to 12%
  • Lodging tax would increase from 9% to 12%
• Elimination of Tax Expenditures ($87 million in revenue):
  • Elimination of state subsidies to businesses
• Other Increases ($78 million and $150 million in revenue):
  • Broaden the sales tax to recreational services and other services
  • Increases to excise taxes on alcohol and tobacco

Adopting the plan means creating a state-level individual mandate, which was one of the most unpopular aspects of the Affordable Care Act, also known as ObamaCare. The mandate was repealed in December 2017 as part of the Tax Cuts and Jobs Act. Mainers would be required to purchase insurance (or in this case participate in the public plan) or pay a fine if deductions for the public coverage are not automatically made regardless of an individual’s willingness to participate.