Amendments on fairness, fiscal responsibility, and property tax reductions
March 23, 2012
AUGUSTA – Democratic lawmakers in the Maine House say they will introduce three amendments to make a Republican-backed TABOR measure more fiscally responsible and fair for the middle class. The bill may be brought up for votes in the Maine House today and is expected to pass in the Republican-held body.
“We may not be able to stop this train wreck bill, but we can try to mitigate the harm it may cause,” said Rep. Seth Berry, D-Bowdoinham, the lead Democrat on the Taxation committee.
The bill, LD 849, ratchets down state revenues by gradually lowering Maine’s income tax rates to a flat 4 percent, with 75 percent of the benefit going to the top 20 percent of taxpayers. The bill would reduce the state income tax revenue by $600 million per year. The proposal uses 40 percent of one-time surpluses that would typically be put in the state’s “rainy day” fund to make permanent cuts without paying for them in future years.
A new analysis by Maine Revenue Services shows the Republican TABOR bill will create a greater disparity of winners and losers if it is unchanged.
By ratcheting down the income tax without paying for it, LD 849 would give an average tax reduction of only $1 to the bottom 20% of income earners. This group includes, for example, a single parent of two working full-time at minimum wage. It also includes many low-income seniors without pensions, who depend on Social Security. By comparison, the tax cut would give an average reduction of over $21,000 to the wealthiest 1% of Maine residents. This group makes an average adjusted income of roughly three quarters of a million dollars.
"Maine's tax code is already unfair to the hard-working coastal families I represent," said Rep. Walter Kumiega, D-Deer Isle. "We should be making work pay and lifting families out of poverty, not passing another gift to high income earners."
According to a study released by Maine Revenue Services last summer, Maine's wealthiest 1% already pay an effective tax rate that is 14% lower than average.
Kumiega's amendment would use the mechanism in LD 849 to reduce income taxes, but would do so more fairly. The amendment increases Maine's Earned Income Tax Credit, based on a federal program created by President Ronald Reagan to reward work and lift families out of poverty. It also uses LD 849's funding to adjust the income tax brackets for all taxpayers, benefiting more families more fairly.
Another amendment, sponsored by Rep. David Webster, D-Freeport, would require that the tax cut for each future year be fully funded by surplus revenue, as supporters of the bill have claimed it already does. In reality, the bill pays only for the initial year, locking in and ratcheting down revenues into the future.
“As written, this bill is as irresponsible as taking on a car payment after winning a $100 on a scratch ticket,” said Webster. “Maine's families and businesses don't buy what they can't afford, and neither should we."
The third amendment, sponsored by Berry would put property tax reductions ahead of income tax reductions. As mandated by Maine voters in June 2004, the Berry amendment would put money first towards funding 55 percent of K-12 education.
According to the nonpartisan fiscal office of the Maine Legislature, full implementation of LD 849 as written would cause losses to Maine schools, roads, bridges, and towns totaling over $1.2 billion per biennium.
"This bill would enact future tax breaks to take credit for them now, then let others make the tough choices to pay later,” said Berry. "The Legislature has that enough lately, and we hope our amendments may offer viable alternatives to moderates who still do believe in fairness, paying as you go, and putting people first."
The bill has already been passed in the Maine Senate.
Jodi Quintero [Berry, Kumiega, Webster], 287-1488, c. 841-6279