By Rep. Laurel Libby
Last week, Augusta Democrats passed a supplemental budget that includes a new income tax bracket, adding an extra 2% on income over $1 million per year. Governor Mills signed it into law before the week was out.
This tax targets about 2,600 filers, just 0.4% of Maine taxpayers. But here’s the part they don’t emphasize: those same filers already account for roughly 18% of all income tax revenue collected in our state. The new surtax is projected to raise about $90 million per year.
Governor Mills had previously opposed this kind of tax increase, vetoing a similar standalone bill in 2024. Now, facing pressure from her party’s left wing as she attempts to win her primary, she signed it anyway. She knows the math behind this policy is shaky. But in Augusta, political pressure wins out over economic reality. Governor Mills wanted $300 checks to help her attempt to buy the election, so she had to support the “millionaire” tax that Legislative Democrats demanded.
This is the cost of single-party Democrat rule: they come together to inflict more economic pain on Mainers.
Now the question is no longer whether this will pass.
It’s what happens next.
With this change, Maine’s top marginal income tax rate climbs to 9.15%, now the highest in New England. That puts us above Massachusetts, which recently moved to a 9% combined rate on income over $1 million.
Lawmakers are betting that those roughly 2,600 high earners will simply stay put and absorb the increase. But that’s not what the evidence shows.
Researchers at Stanford examined how taxpayers responded after California passed Proposition 30 in 2012, raising top income tax rates. Just in the first year, 0.8% of top-bracket taxpayers left the state.
That might sound small, but the real impact came from both those who left and those who stayed but changed their behavior. The result? The actual revenue collected in year one was 45% less than the state estimate. By year two, it was 61% less. And get this: a majority of departing residents left for states with zero income tax.
We don’t have to look all the way to California, either. Massachusetts is already seeing early warning signs. IRS migration data released March 2026 show that about $4.2 billion in adjusted gross income left the state in 2023, the first full year of its 4% millionaire surtax. Taxpayers earning $200,000 or more accounted for 70% of that outflow, more than double their 2019 share.
The top destinations? Florida and New Hampshire, for obvious reasons.
Let’s bring this closer to home.
Maine collects about $2.7 billion annually in individual income taxes. The new surtax is expected to generate roughly $96 million in its first full year. That means the state is banking on about a 3.6% increase in total income tax revenue.
But those 2,600 filers already contribute around $427 million under current law. That’s a tiny fraction of taxpayers, just 0.4% of filers, carrying nearly one-fifth of the entire burden.
If just 10% of those households leave or significantly reduce their taxable income in Maine, the state loses both the new surtax revenue and a meaningful portion of what it already collects from them. Given how concentrated that tax base is, that scenario likely wipes out any projected gain.
If 20% leave, Maine isn’t just missing its revenue target, it’s in the red. The state would collect less total income tax revenue than it does today, before the new tax existed.
And that’s before we even talk about the broader economic impact.
The 2,600 filers in the crosshairs are disproportionately likely to be the physicians, attorneys, specialty contractors, financial advisors, and business owners who anchor local economies from Portland to Presque Isle. When one of them relocates to New Hampshire, they do not just take their personal tax return with them. They take a payroll, a customer base, and a web of economic activity that generates sales tax, property tax, and employment for other Mainers.
In southern Maine especially, relocating can be as simple as moving a business address across the border into New Hampshire. Same customers, same workforce, but radically different tax structures.
And who pays when they leave?
When revenue falls short, lawmakers will face a choice. Either cut the programs they just funded, or look for new taxpayers to make up the difference. That usually means middle-income families, the very people already struggling with one of the highest overall tax burdens in the country.
This tax is not fiscal stewardship. It is a gamble, and everyday Mainers will be left with the bill when it doesn’t pay off.
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Rep. Laurel Libby (R-Auburn) represents District 90 in the Maine House of Representatives and is the founder of Lead Maine, LeadMaine.com.
