April 23, 2013

The Maine Legislature’s Taxation committee heard testimony on a number of income-tax related bills today, including several that would make Maine’s tax system more fair and help to close the state budget gap by reinstating the 8.5 percent tax rate for high-income filers.

“I pay a lot of tax. I should. I earn a lot. In the last two years the income taxes I pay in Maine have gone down … it has not made me go and open another car dealership, I have not gone out and bought another suit, or a boat, or a computer because of it. Lowering taxes for wealthy people and raising the property taxes for the rest of the population is not fair or right,” said Adam Lee, Chairman of the Board of Lee Auto Malls. “A strong middle class is not helped by tax breaks for the rich. We need to be able to continue to support our schools, fix our roads, and pay for the infrastructure for which each town is responsible.”

Other proposals include delaying the LePage tax cuts, which disproportionately benefit the wealthy, and a Maine Buffett Rule that would equalize the tax rates paid by Mainers for total state and local taxes. Rep. Seth Berry’s Buffett bill applies the logic of Warren Buffett, who has asserted that it’s wrong that his secretary pays a higher tax rate than he does.

“Maine now requires a single mother making minimum wage to pay a greater share of her income in taxes than a millionaire,” Berry said. “It’s time for us to end this basic unfairness in our tax policies.”

The highest-income households in Maine currently pay roughly 10 cents per dollar on state and local taxes: income, sales, use and property. The average household pays slightly more than 11 cents while the lowest-income households pay 17 cents.

Berry’s proposal would equalize the tax rates by having those making at least $350,000 pay on average just a penny more per dollar. The change is estimated to raise approximately $200 million in the first biennium – roughly half of the budget gap created by tax breaks largely for the wealthy passed in the previous Legislature – and would go towards tax cuts for middle-class and working families starting in 2016.

Four out of five Maine voters support the approach, according to a poll by the Maine People’s Resource Center. The state’s Congressional delegation has supported a federal version of the Buffett Rule.

LD 1124, a proposal from Rep. Peter Stuckey would create a new income tax rate structure, with a 10 percent rate for the top 8 percent of files.

“For decades, Maine’s middle class and working families have needed a modernized and simplified tax code that treats them fairly. We must not keep them waiting any longer,” said Rep. Adam Goode, another bill co-sponsor and House chairman of the Taxation Committee.

Jackie Edwards of Gray made the trip to Augusta to express her fear that an increase in property taxes under the LePage budget, along with increasing costs of medication and other essentials, will price her out of her home. She and her husband are retired and live on a fixed income.

“The Governor’s proposed budget would force local towns and cities to make the impossible decision of raising property taxes on people like me, or making drastic cuts to the services we all need,” said Edwards. “I support the more fair bills being considered today because they will help us avoid these costly property tax increases and help us raise money in a more responsible way to maintain the programs and services our towns, cities, and state need.”

More than 70 municipalities across the state have now passed resolutions against the proposed cuts to revenue sharing, which would necessitate increases in local property taxes, and in favor of a fair tax budget solution.

Brenda Kaler, a retired state employee living in West Gardiner, has already been skipping medical appointments in order to save money. She saw her pension capped under the previous biennial budget in order to pay for the new income tax cuts and, under the current budget proposal, the State Employee Health Plan would be underfunded, leading to even more out-of-pocket medical costs.

“The direction we are going in is just plain wrong. The last two biennial budgets have asked lower- and middle-income people to absorb all the burden of balancing the state budget. It’s time that we ask high-income earners to do their part,” Kaler told the committee. “Your colleagues have presented you with multiple options to achieve this equity and I urge you to pass a tax policy that supports this principle.”

West Gardiner would see a $401,419 cut to revenue sharing under the LePage budget proposal and Kaler says she can’t afford the property tax increase that would be the likely result.

“We have a dilemma in Maine,” Garrett Martin, executive director of the Maine Center for Economic Policy. “We want good schools, good roads, safe communities, and opportunities to achieve a better life. Unfortunately, our current tax system is not generating the revenues needed to sustain public investments that will result in safe and vibrant communities and a strong economy. Adjusted for inflation, General Fund revenue in the FY 2014-2015 biennium is forecast to be lower than in any two-year budget period since the end of FY 1997 and a billion dollars below what it was in the FY 2006-2007 biennium. That’s a billion dollars we don’t have to make needed investments in our people, our schools, and our communities.”