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Legislature holds hearing on proposal to return unappropriated surplus revenue to taxpayers

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The Maine Legislature’s Appropriations and Financial Affairs Committee held a public hearing Wednesday on LD 327, a Republican-sponsored bill intended to return a substantial part of budget surpluses to taxpayers. 

LD 327 is a carryover bill from the 130th Legislature’s first session. A concept draft of the bill would put only funds necessary to cover the state’s obligations into the General Fund. Of the remaining funds, 75% would be returned to taxpayers on a pro rata basis, and the remaining 25% would go to the Budget Stabilization Fund, also known as the Rainy Day Fund.

However, during the public hearing, Rep. Jeff Hanley (R-Pittston), the bill’s sponsor, announced his desire to change the percentage of surplus funds that would be returned to taxpayers from 75% to 90%, leaving 10% to be transferred to the Rainy Day Fund.

Hanley also provided more detail on how surplus funds would be returned to Mainers, should the bill become law. Wage earners would receive a refund proportional to their income tax and all other Maine residents would receive a refund on a per-person scale.

“I do not want to leave anyone out of this give back. All of the people of Maine pay taxes of some kind,” Hanley said. 

Hanley also emphasized that he believes tax rates across the board are too high and that the rates of various taxes paid by Mainers are “not the issue” the legislation looks to address.

“We have collected a huge surplus, and the very word surplus tells me the state does not need it. This money belongs to the people, not to the state, so let us give it back by enacting this bill,” Hanley said. 

Sen. Trey Stewart (R-Aroostook), the bill’s cosponsor, also offered supporting testimony.

Stewart noted the increase in the size of the state budget since he first took office, from $7.8 billion to $8.5 billion in the most recent budget.

“Rather than supplementing shortfalls in our state budget, that money is creating new government-run programs,” he said.

Stewart said he believes Mainers would rather see that money go back into their families’ budgets to “offset the increasing cost of virtually everything,” than spent on new government programs.

Nick Murray, policy analyst for the Maine Policy Institute, also testified in favor of the bill. Murray favored returning the surplus to taxpayers through “direct, structural tax relief” rather than in the form of direct checks.

Murray proposed replacing the budget’s current cascade formula with a new cascade that would put 90% of excess revenue towards paying down the rates of consumption taxes, like the service provider tax, fuel tax, and sales tax. The revenue allocated towards this end would be calculated by the amount brought in by each respective tax over the last fiscal year or biennium.

“Lawmakers can promote long-term economic stability by allowing surplus state tax revenue to trigger diminishing tax rates year-over-year. Focusing tax relief on triggering lower consumption taxes, for instance, would make sure every cent goes back to the people, not to wasteful programs and tax credit schemes, and that relief helps those struggling most. Maine people, especially those on strained or fixed incomes, are hurting far more than state government,” Murray said.

Adam Zuckerman, a lobbyist for the Maine People’s Alliance, and Sarah Austin, the policy and research director for the Maine Center for Economic Policy, testified against LD 327.

Zuckerman said the state is in an “unprecedented crisis” that reveals Maine’s social safety net is underfunded. He blamed former Governor Paul LePage’s administration for “deliberately slashing essential public programs to give tax breaks to the wealthy,” and decimating programs that would have helped the state respond to the pandemic.

Austin said the pandemic has “supercharged inequality and concentrated wealth” and opposed what she described as a “blanket giveaway of revenues” in the proposed bill. She said returning the revenue in the manner prescribed by LD 327 “dismisses the unequal footing Maine families and businesses have in the economy and squanders opportunities to use these resources to address the specific problems that are holding some groups back from success.”

She also favored a more targeted approach, such as expanding refundable state income tax credits like the sales tax fairness credit, the earned income tax credit, and the property tax fairness credit.

“These kinds of proposals also cost less, allowing for more cash to get in the hands of the households in greatest need than would be allowed under a blanket giveaway to all households and leaves more revenues for investing in solving economy-wide problems plaguing Maine families such as lack of affordable housing, childcare, and workplace benefits like paid family medical leave,” Austin said. 

Rep. Sawin Millett (R-Waterford) asked both Murray and Austin if they would be interested in drafting language supporting their favored proposals, and both expressed a desire to do so.

About Katherine Revello

Katherine Revello is a reporter for The Maine Wire. She has degrees in journalism and political science from the University of Maine. Her writing has appeared in Reason, The Washington Examiner, and various other publications. Got news tips? Contact Katherine at krevello@mainepolicy.org.

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