Lawmakers have voted this week to restructure the Maine’s income tax brackets to impose a higher tax rate on the state’s highest earners while simultaneously expanding eligibility for the lower brackets.
LD 229 — An Act to Bring Fairness in Income Taxes to Maine Families by Adjusting the Tax Brackets and Tax Rates — was sponsored by Rep. Ann Higgins Matlack (D-St. George).
The changes included in this bill would take effect for the tax year beginning on January 1, 2026.
Under the proposed brackets, Maine’s top tax rate would increase by 1.8 percent to a maximum of 8.95 percent.
This new rate will apply to individuals making more than $500,000 annually, heads of household making over $750,000, and married couples making above $1 million each year.
A tax rate of 7.75 percent — representing a .6 percent increase over the current maximum — would be applied to individuals earning between $144,500 and $500,000, heads of household bringing in between $216,750 and $750,000, and married couples making between $289,000 and $1 million.
To accomplish this restructuring, two new tax brackets were added to the existing set up, resulting in a more granular approach to taxation.
Currently, individuals earning over $50,000 a year, heads of household making more than $75,000, and married couples reporting above $100,000 in annual income are responsible for paying the top tax rate of 7.15 percent.
Under the new structure, those within these ranges would only be required to pay a tax rate of 6.75 percent.
The new income tax structure would also reduce the state’s lowest tax rate by .3 percent to 5.5 percent, as well as broaden eligibility for it to roughly double where it currently stands.
Under Maine’s income tax system, the tax rate for a given bracket is only applied only to the income earned over the upper-threshold of the previous bracket.
The original version of this bill contained a more complex income tax structure designed to offset the savings that wealthier Mainers would have enjoyed as a result of this set up, but this scheme was removed from the final legislation.
This plan to restructure the brackets was also cosponsored by Rep. Anne P. Graham (D-North Yarmouth), Rep. Lori K. Gramlich (D-Old Orchard Beach), Rep. Julia A.G. McCabe (D-Lewiston), Rep. Amy J. Roeder (D-Bangor), and Rep. Melanie F. Sachs (D-Freeport).
This is not the first time that Maine lawmakers have attempted to restructure the state’s income tax brackets so as to impose a higher rate on top earners while simultaneously expanding the lower brackets.
Ultimately vetoed by Gov. Janet Mills (D), a bill passed by lawmakers in the 131st Legislature employed many of the same tactics seen in the bill currently before the Taxation Committee, LD 229.
Gov. Mills explained in her veto letter that she felt the bill did not “deliver meaningful tax relief” to low-income Mainers.” She also argued that it would disrupt the stability of the state’s tax revenue due to the volatility of the highest-earners’ income sources.
Following a public hearing and work session, members of the Taxation Committee split along partisan lines with Democrats supporting it and Republicans opposing it.
Lawmakers in the House and Senate then approved the bill along partisan lines earlier this week. LD 229 is now on course to be sent to Mills for a signature.
