A Harpswell Democrat’s bill to levy an additional four percent tax on income earned over $1 million in order to fund public education is now on track for adoption by the Maine State Legislature.
Sponsored by Rep. Cheryl A. Golek (D-Harpswell), LD 1089 would impose this new “surcharge” on income beginning with that generated this year.
The four percent tax would only be applied to the portion of a Mainer’s income that is above the $1 million threshold, meaning that everything up to that point would not be subject to this additional fee.
As the law is currently written, revenue collected from this tax could only be used to fund public pre-kindergarten through grade 12 education.
Cosponsoring this bill are a number of other Democratic lawmakers, including Speaker of the House Ryan D. Fecteau (D-Biddeford), Sen. Mike Tipping (D-Penobscot), Rep. William R. Bridgeo (D-Augusta), Rep. Gary Friedmann (D-Bar Harbor), Rep. Drew Gattine (D-Westbrook), Rep. Laurie Osher (D-Orono), Rep. Ambureen Rana (D-Bangor), Rep. Suzanne M. Salisbury (D-Westbrook), and Sen. Jill Duson (D-Cumberland).
[RELATED: Maine Dems Look to Tax Income Over $1 Million to Increase Funding for Public Schools]
A late March public hearing on LD 1089 drew a great deal of testimony from both supporters and opponents of the proposal.
While those representing business and free market interests testified in opposition to the bill, representatives of municipal, educational, and social justices interests expressed support for the measure.
Those arguing in support of the bill focused both on the need for additional state funding for public schools, as well as on the perceived fairness that this surcharge would create within Maine’s tax code.
“Fixing this will require lifting the minimum teacher salary and providing greater support for mentoring in our schools — both of which cost money and increase the cost of education, thus increasing the cost of the 55% funding requirement,” said the Maine Education Association (MEA).
“LD 1089 would make sure that Maine’s wealthiest residents are simply paying their fair share, and that our budget shortfalls are being addressed in an equitable manner,” said Maine Youth Power. “Not only would this help avoid balancing the budget on the backs of our most vulnerable, it would also act as a direct investment in this state and its young people.”
“A multimillionaire should not be paying the same tax rate as a Mainer with taxable income of just $60,000 – especially when we have policy tools like this bill at our disposal which take a finer, more targeted approach, argued Maine Equal Justice.
“Investigating avenues of bolstering the education funding pot of money is supported by municipal officials, if there are safeguards to protect the current method of funding the required 55% of K-12 education,” explained the Maine Municipal Association (MMA). “Any additional funds should supplement this statutory funding and not replace it.”
“Middle-class Mainers are currently paying higher effective tax rates than millionaires in our state,” said bill sponsor Rep. Golek. “This is not right. It’s past time to ask those who benefit the most to pay their fair share. We must remember that those who benefit the most only do so because of the hard work and needs of those who benefit the least.”
Opponents of LD 1089 argued that tax increases would be harmful to the state’s economy, have an outsized impact on entrepreneurs and businesses, and not necessarily improve public education as hoped.
“Advocates often claim that more education funding automatically leads to better student outcomes,” said the Maine Policy Institute (MPI). “Yet decades of data show that spending alone does not guarantee improved academic performance.”
“LD 1089 is the wrong solution at the wrong time. It sends a damaging message that Maine intends to punish financial success and economic leadership,” MPI argued. “This bill would push high-income earners and small business owners to consider more welcoming tax climates, shrinking our economic base and undermining long-term revenue stability.”
“These proposed tax increases, particularly on capital gains and higher income brackets, threaten to create serious, unintended consequences for our industries,” said HospitalityMaine. “Additional taxes on capital gains and high-income brackets will further strain these businesses by discouraging the reinvestments necessary for growth and innovation. Research indicates that tax differentials can influence high-income individuals’ decisions to relocate.”
HospitalityMaine also raised concerns that the bill’s purported purpose of funding public education may mislead the public, as there is nothing binding future legislatures from re-appropriating the money collected from this tax.
“The tax proposed in LD 1089 disproportionately impacts a small group of taxpayers and penalizes the success of these individuals, ultimately targeting entrepreneurs and small businesses across the state,” said the Maine State Chamber of Commerce. “If Maine is to grow it’s economy, it must focus on attracting high earners, entrepreneurs innovators that bring investment here to the State. Paying higher taxes would impact the amount a business owner chooses to reinvest in their businesses in terms of capital and personnel. Failure to reinvest can have a direct impact on growing the economy and job creation.”
Following this public hearing, members of the Taxation Committee voted along partisan lines in support of this bill, with all Republicans opposing it and all Democrats favoring it.
Although LD 1089 has not yet been considered on the floor of the House or the Senate, the Committee’s majority Ought to Pass report has likely set the bill on a path for eventual adoption. That said, the Legislature is not necessarily bound to accept the Committee’s recommendation.
Click Here for More Information on LD 1089
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