Tax Committee and Mills Administration Ax Bid to Cut Kids Some Slack on State Income Filings

The Legislature’s Taxation Committee has unanimously rejected a bill exempting any money earned by Maine kids from state income tax.

This proposal would have made any income earned by someone under the age of 18 years tax-free, either for the individuals themselves or by those who claim them as dependents beginning on January 1, 2026.

Although this legislation was primarily led by Republican lawmakers, it also had support from both Independent and Democratic members of the House.

Sponsoring this bill were Rep. Benjamin C. Hymes (R-Waldo) and Senate Minority Leader Trey Stewart (R-Aroostook) alongside Reps. David Boyer (R-Poland), Quentin J. Chapman (R-Auburn), William D. Pluecker (I-Warren), Parnell William Terry (D-Gorham), as well as Assistant House Minority Leader Katrina J. Smith (R-Palermo).

“I believe this proposal offers several key benefits: it encourages youth to work, allows them to keep their hard-earned money, and helps them build a strong financial foundation,” Rep. Hymes said when introducing this bill. “Minors cannot vote, serve in the military, or influence how their tax dollars are spent — so they shouldn’t be taxed.”

Testifying in support of this bill was the Maine Policy Institute (MPI), arguing that the proposal “is a targeted and principled reform that will reduce unnecessary burdens on young Mainers entering the workforce and strengthen Maine’s long-term economic health.”

MPI went on to point out that most young Mainers already earn well below the federal standard deduction, meaning that they already owe no state income tax.

“As such, LD 1363 is largely symbolic and would have a negligible impact on state revenues,” MPI said. “But its symbolic value is important. It affirms that the government will not treat the modest efforts of young workers with the same tax burden it imposes on adults earning full-time incomes.”

For those who do earn above the standard deduction, MPI suggests this bill would “this bill ensures”[ensure] they are rewarded, not penalized, for going above and beyond.”

Testifying in opposition to this bill was a representative of the Department of Administrative and Financial Services (DAFS).

DAFS raised concerns that this bill would have “add[ed] complexity to tax returns and may [have] encourage[d] tax avoidance by shifting income to dependents under the age of 18.”

“Additionally, the absence of a cap on the amount of the income exclusion may result in increased fraudulent activities as some taxpayers may attempt to shift taxable income to minor dependents to avoid Maine’s individual income tax,”said DAFS.

According to their interpretation, this change would have resulted in a loss of about $800,000 annually, with the potential for this figure to grow in the case of tax avoidance.

Because the Committee’s Ought Not to Pass report was unanimous, this proposal will not be considered any further this session unless legislators take extraordinary action.

Disclosure: The Maine Wire is a project of the Maine Policy Institute.