This week, my legislative colleagues on the Taxation Committee held a public hearing on my bill to reform Maine’s income tax code; LD 1369, “An Act To Provide Stimulus for Economic Recovery by Enacting a Flat 5 Percent Flat Income Tax.” The bill does exactly what the title suggests: It would eliminate the three income tax brackets that currently exist in Maine and replace them with a single, flat 5% rate.
To be clear, times are tough for Maine businesses and workers, and many are struggling to make ends meet. Maine’s tax brackets currently go from 5.8% to 6.75%, to the upper rate at 7.15%. Implementing a flat 5% income tax would lower the tax burden on all hardworking Mainers. People should be allowed to keep as much of the fruits of their labor as possible. Our neighbor, New Hampshire, imposes no income tax. LD 1369 would make Maine’s tax code more competitive with the rest of the nation and our economy stronger on many levels.
The first is obvious – competing with New Hampshire for residents, skilled workers, businesses and high salary positions with advanced degrees, like physicians. Lowering Maine’s income tax to a flat 5% would help our state attract all of the above as we rebuild from COVID-19 and set our sights on the future.
More importantly, it would help us to retain our existing business, workforce and professional medical infrastructure. We do not want our people and job creating businesses to flee Maine for states with a lower tax rate, or no income tax rate at all, but that’s a real possibility after everything that has occurred over the last year.
Maine is quickly moving up the charts to become one the highest taxed states in the nation, and this is not a sustainable pathway to economic success. How is our escalating and burdensome income tax rate going to attract new entrepreneurs, innovators or the next generation of talented doctors who are looking to start their professional lives, put down roots and start a family, hopefully in Maine?
Sadly, the current income tax paradigm does not attract any of these vital professionals or improve our economy, and that is why LD 1369 is a very necessary bill for Maine’s future economic success.
Maine household incomes are modest at best, and our exorbitant taxes play a major role in this. Allowing all Mainers to keep more money in their pockets from a flat 5% tax would empower them to spend more at local businesses, resulting in a healthier economy across the state.
Our tax structure must not be punitive to those who strive to be successful business owners. Those entrepreneurial types must be empowered and supported by their government. We must allow our business owners and entrepreneurs to succeed, and a flat 5% income tax would help accomplish that.
In these tough times, businesses would not have to beg for help from the government if they were allowed to keep more of their hard-earned money. A large share of this extra income for pass-through entities resulting from a flat 5% tax would surely be reinvested into their operations as they chase success and seek to reclaim what they had before the pandemic.
The time is now to enact a flat 5% income tax because of the federal money pouring into Maine as a result of relief programs enacted by Congress. The state should be allowed to use those funds to fill any gap in revenue resulting from the newly enacted flat 5% income tax, to provide relief to our businesses and all working Mainers.
We as a Legislature can do this if we want to, and we should because our people need the relief. I hope my colleagues will join me this session in pursuing tax policy that actually benefits the people of Maine – current and future residents included.
