Maine legislators have killed a bill that would have abolished the state’s income tax and required agencies to regularly engage in “zero-based budgeting.”
Although the rejection of this bill was still divided primarily along partisan lines, there was a greater degree of crossover in both the House and the Senate than is typical for high-profile legislation.
The bill, LD 671, was sponsored by Rep. Laurel Libby (R-Auburn) and cosponsored by a handful of other Republican legislators.
Under the proposed law, the state government would have been prohibited from collecting income tax from residents as of January 1, 2026.
The state would also have been directed to develop a zero-based budgets for fiscal years 2026-27 and 2028-29. From that point on, all departments and agencies in the Executive, Legislative and Judicial Departments of State Government would have been required to create a zero-based budget at least once every eight years.
For the purposes of this legislation, “zero-based budgeting” refers to a method of budgeting where all “programs and activities are justified for a budgetary period using cost-benefit analysis without regard to the amount that was budgeted for those programs and activities in a prior budgetary period.”
In other words, all corners of the state government would have been regularly required to reconsider all aspects of their spending and rebuild their budgets from the ground up.
This technique has often been championed by fiscal conservatives as a means by which to restrain the growth of government spending.
During off-years, departments and agencies would have needed to undertake “targeted budgeting or a similar alternative” that include, at a minimum, recommendations for five percent and 10 percent spending reductions.
[RELATED: Should Maine Be Charging Residents Income Tax? These Lawmakers Don’t Think So]
During it public hearing earlier this year, a representative of the Department of Administrative and Financial Services (DAFS) testified in opposition to this bill, arguing that it seeks to eliminate the income tax “without consideration of the impact of those cuts on the services offered by the State of Maine and the people who rely on those services.”
The Maine Education Association (MEA) also testified against this bill, suggesting that the repealing the income tax would force public schools to rely more heavily on property tax revenue to fund their operations.
The Maine Center for Economic Policy (MCEP) argued that eliminating the income tax would result in lower- and middle-income Mainers bearing a more substantial tax burden.
The Maine Policy Institute (MPI), on the other hand, testified in support of this bill because it “presents a transformative opportunity for Maine to usher in a new era of economic competitiveness and fiscal responsibility.”
[RELATED: Lawmakers Divided Over Bill Eliminating Maine’s Income Tax and Require “Zero-Based Budgeting”]
Lawmakers on the Taxation Committee were divided over this bill, with most members opposing it and three Republican representatives supporting it.
A handful of Republicans in both the House and the Senate voted against LD 671 in roll call votes on the chamber floor Monday, breaking with the majority of their party. The only Democrat to vote in support of this bill was Sen. Craig Hickman (D-Kennebec).
This bill has now been placed in the legislative files as dead and will not be considered any further this session.
Disclaimer: The Maine Wire is a project of the Maine Policy Institute (MPI)
