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Legislation lowers the top income tax rated from 6th highest in the nation to the middle of the pack
June 1, 2009
Augusta. ME—The Maine House of Representatives passed a tax reform package today that lowers income taxes on Mainers, reduces Maine’s tax burden by $58 million, and will stimulate economic development. The package, which was introduced in March and had a public hearing in April, is a wholesale revision of the tax code in order to put Maine in a better position to grow the state’s economy and reduce the tax burden on residents. The Taxation Committee refined the bill and supported a slightly modified and improved version of the legislation after receiving input from the public hearing and community forums around the state.
The bill lowers the top income tax rate from 8.5 percent to 6.5 percent, and significantly lowers the rate for most Mainers well below 6.5 through a household credit system. The income tax reduction is paid for by a sales tax expansion to a number of highly exportable and discretionary items. Because of new revenue captured from out of state visitors, the burden on Maine citizens will drop by $58 million.
“Today is the first step in providing the tax reform and relief to the citizens of the state of Maine,” said House Majority Leader John Piotti, D-Unity, the sponsor of the bill. “The newly structured tax code will lower income taxes on Maine people and provide broader benefits to the state when the economy rebounds. This reform is long overdue, and I’m proud to have the support of the Maine House.”
The House voted 84-59 to give initial approval to L.D. 1088, “An Act to Modernize the Tax Laws and Provide Residents of the State $50,000,000 in Tax Relief.”
“Lowering the income tax rate for Maine people will put money in their pockets,” said Speaker Pingree. “Maine’s small businesses that file under the individual income tax will see a tax break too. As we work to bring the economy out of recession, this will have a positive impact on business investment.”
By dropping the income tax rate and paying for it by exporting more tax burden, sponsors argued the new tax code will encourage private capital and investment in the state. The prospect of attracting more businesses to Maine was a major selling point for the Taxation Committee and supporters of the bill. A number of business organizations supported the bill, often citing the problems they experience bringing new investment to the state. The Portland Regional Chamber of Commerce, the Androscoggin Chamber of Commerce, the Bangor Region Chamber of Commerce, and the Scarborough Economic Development Corporation were all in favor of the bill.
“The income tax rate has been the bane of Maine’s economic existence,” said House chair of the Taxation Committee Thom Watson, D-Bath. “Rightly or wrongly, it’s been the one of the things that has stopped businesses from moving to the state. LD 1088 will help to correct that.”
Tax reform has been sought after in Maine for decades. In good economic times and bad, many citizens and businesses from around the state have long clamored to reform the tax code. Sponsors argue the current system leans toward taxing wealth creation, with a high income tax and narrow sales tax base. Because the highest tax rate kicks in at a very low level of income, under $20,000, many low income individuals in Maine see a large portion of their paychecks taken in taxes. AARP, an organization representing older individuals in Maine, supported the bill because of the drop in income taxes on low income and elderly citizens.
“After 5 years of service in this house, I can say this is an issue that concerns us all,” said Taxation Committee member Rep. Mark Bryant, D-Windham. “I know we don’t want to go home to those people on fixed incomes and tell them that we didn’t do anything to reduce their tax burden. Our choice today is simple. We can vote for more of the same, a lack of economic growth, or we can vote yes, and help the citizens of this state.”
“For many years before I was Legislator, it was obvious that tax reform in Maine was needed,” said Rep. Patsy Crockett, D-Augusta. “When this package passes, it will put 58 million dollars in the pockets of Mainers when they really need it in these tough times. In the end, it is a win for all Maine citizens.”
Other House members applauded the legislation’s effect on state revenues, which would be stabilized through a broader sales tax and lower income tax. The state budget, which passed only a few short weeks ago, addressed a 1.4 billion dollar shortfall due to the struggling economy. There was a precipitous drop in sales tax collections, which widened as the economy fell further in to recession.
The legislation will face further votes in the House and Senate. If passed by the Legislature, the bill would go to the Governor.
Contact:
Speaker of the House Hannah Pingree, 287-1300
House Majority Leader John Piotti, 287-1430
Kyle Leighton, communications director, 287-1433 (Piotti, all other Reps.)
Tim Feeley, communications director, 287-1306 (Pingree)