Wealth inequality is a growing problem - a new Maine bill is an important step to help solve it
Representative Ben Collings of Portland speaks to reporters and supporters about his bill to boost opportunity for poor and middle-class Mainers by taxing multi-millionaire estates.
LD 420 would bring Maine in line with other New England states' efforts to tax wealth
By Ramona du Houx
A bill before the legislature, LD 420, would tax inherited estates worth more than $2 million. On March 5, 2020 Mainers rallied at the State House in support of LD 420. The legislation would reverse a tax cut for the ultra-wealthy which was enacted under former Gov. Paul LePage in 2015 and raise $14 million in revenue to help fund investments in education, health care, and public services that build opportunity for poor and middle-class Mainers.
Wealth taxes are one of the most effective tools for addressing economic inequality. In Maine today, estates worth up to $5.8 million are excluded from the tax entirely.
“Modest tax adjustments on the wealthiest among us would drive down inequality in our state,” said Rep. Ben Collings of Portland, the bill's sponsor. “By reversing an unfair tax cut given by the LePage administration and more adequately taxing estates worth more than $2 million, we will generate substantial new revenue that can be invested in the programs and services that support all Mainers.”
The bill would bring Maine’s estate tax back to the middle of the pack in New England.
Even after reducing the exclusion, fewer than 1 percent of estates would owe any estate tax when they were passed on to heirs, according to MECEP’s research.
“More than half of all wealth is acquired not by virtue of hard work or merit, but through inheritance. The status quo perpetuates inequality across generations, as the wealthiest families leverage their abundant resources to increase their share of the economic pie and pass their wealth on to their heirs,” said Sarah Austin, the author of a Maine Center for Economic Policy report. “The estate tax is Maine’s only tax that’s paid exclusively by high-wealth households. That makes it a crucial element of any plan to reduce inequality and fund vital investments in Maine people and communities.”
Maine’s estate tax has been watered down over decades. Since 1987, policymakers have more than quadrupled the amount of an estate’s value that can be inherited tax free. According to MECEP, the share of wealth held by the top 1 percent grew from 30 percent to 39 percent between 1989 and 2016. At the same time, the wealth held by the bottom 90 percent of households declined from 33 percent to 23 percent.
The largest estate tax cuts were enacted under Gov. LePage, who pursued an agenda of tax cuts for the wealthy during his two terms in office. When LePage cut the estate tax he cut services needed to education, healthcare and human services, amongst others. Those cuts transferred a burden to Maine’s middleclass, who ended up paying more property taxes to fill the gap LePage made. Those tax cuts cost the state $432 million annually, while state education and local services remain underfunded.
Middleclass tax payers shouldn’t have had to pay for a tax cut to further enrich the 1 percent of Mainer’s.
“As a result of this misguided policy, state and local governments have been starved of badly needed revenue to pay for schools, road repairs, emergency services — services for the most vulnerable among us and investments to support working families,” said Carol Sanborn, president of Machinists Local S89, which represents bus drivers, school maintenance workers, and public works employees. “At a time of soaring wealth inequality and as local governments struggle to fund basic services, we believe that restoring this modest tax on the one percent is a no-brainer.”
No all 1 percenters in Maine wanted the LePage tax cut. “LD 420 is, in effect, asking my wife and me, and some others in the state, to modestly tweak our wills to help fund public services in Maine, such as education. It is a small way to help level the playing field,” said Marcus Hutchins, a Southport resident and supporter of the bill, whose family estate would be affected by the tax.
Under LD 420, less than 1 percent of estates would owe taxes each year, according to analysis by MECEP. Heirs to multi-million-dollar estates would pay an average of 10 cents on every dollar of wealth over $2 million.
“The estate tax ensures that those who have benefitted the most from our economy are pitching in fairly to ensure everyone else has opportunities to succeed too,” said Garrett Martin, MECEP’s executive director. “We urge the legislature to enact LD 420, to restore fairness to our tax code and ensure all Mainers — not just the wealthiest — have a fair shot in our economy.”