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For Immediate Release

Date: 01/02/13

House Republicans Respond to Fiscal Cliff Deal

Tax hikes at federal level underscore importance of tax cuts on state level

AUGUSTA - Congress and President Obama reached a deal to avert the so-called "fiscal cliff" of tax hikes and spending cuts in the federal budget. A deal that increases taxes on most Americans and makes no significant spending cuts, it will hurt Mainers especially hard.

On Monday, before the deal was reached, Mike Allen, associate commissioner for tax policy at Maine Revenue Services, said that the elimination of the payroll tax holiday would cost Mainers $355 million in extra Medicare and Social Security contributions. The payroll tax holiday was allowed to sunset as a result of the deal reached by Congress on New Year's Eve.

The payroll tax increase alone means that Mainers will send $273 dollars per head—for every man, woman, and child—out of state to the federal government. Somebody earning $50,000 per year will pay an additional $1,000 per year in taxes when the payroll tax rate increases from 4.2 percent to 6.2 percent.

"This is a huge drain on Maine's economy," said House Republican Leader Ken Fredette (R-Newport). "That money is gone; it does not come back to Maine in the form of added benefits."

There has been speculation among commentators and analysts that Democrats may try to repeal the tax cuts implemented by the Republican Legislature of 2011-2012. Republicans say that if ever there was a time for the state Legislature to refrain from raising taxes on Mainers, it is now.

"The absolute last thing we should be considering doing right now on the state level is repealing tax cuts," said Assistant House Republican Leader Alexander Willette (R-Mapleton). "We're already one of the most heavily-taxed states, and the federal government is about to take even more from us."

The Republican income tax cuts eliminated income taxes for 70,000 Mainers earning between $21,000 and $35,750, disproportionately benefited the lower 90th percentile of filers, put $337 back into the pockets of the average Maine family, and are projected to create 3,700 jobs in Maine by 2015. Other tax cuts provided business incentives to expand and hire more workers. The LePage Administration recently confirmed that it had submitted legislation to maintain one such incentive beyond 2015.

"I am very glad that the Governor wants to make the sales tax exemption for aircraft parts and equipment permanent," said Fredette. "We've seen firsthand how it has led to more jobs, and frankly, after the fiscal cliff deal, we can't be raising any taxes on Maine businesses or families."

The bifurcated nature of the deal, with tax increases to take effect immediately and spending cuts to be deferred for two months, creates uncertainty at the state level and in the private sector.

"Raising taxes without resolving the issue of spending cuts and the raising of the debt ceiling continues to create uncertainty for state governments and businesses alike," added Fredette. "My fear is that reductions in federal programs will only result in passing costs on to state and local governments."

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Contact:
David Sorensen, Communications Director
Maine House Republicans
Tel: (207) 205-7793