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By Rep. Seth Berry
July 14, 2009
The Maine Legislature passed a major tax reform package in the final days of session that will bring Maine’s tax code in line with the 21st century economy.
The tax reform plan will reduce the tax burden for Maine people by more than $57 million every year, in part by lowering the top income tax rate. By reducing the top income tax rate from 8.5 percent to 6.5 percent, (which kicks in at incomes below $20,000) Maine residents will see hundreds of extra dollars in their paychecks throughout the year. This is money you and your family will be able to spend however you choose.
The new plan will also lower the taxes and capital gains paid by Maine’s small businesses, 88 percent of which pay the individual income tax rate. By going from 8.5 percent to 6.5 percent, we can spur economic growth, hiring and jobs.
I have received a number of questions about the plan as it relates to Maine seniors and low-income citizens. Most retirees will see benefits from this plan, because their fixed income will be taxed at a lower rate. This will encourage more "snowbirds" or seasonal residents to file in Maine, and help income-challenged seniors in particular.
In addition, low-income seniors and other individuals who don't currently file income tax returns will now be able to receive a refundable credit. It is important that those who have not filed in the past do so next year, to receive this refund.
Low- to middle income taxpayers will also benefit from a partial refundability of the Earned Income Tax Credit. The EITC is a federal income tax reduction, but the benefit is currently limited and this change will again put more money in Mainers' pockets.
Maine citizens at every income level will pay less in taxes next year, and Maine’s elderly and low income workers are no exception. Broader sales taxes will enhance revenue stability for state programs, even as that new cost is more than offset by reductions in the income tax rates.
Thanks to this comprehensive tax reform, Maine will go from having one of the highest income tax rates in the country, and the 14th highest rate of overall tax burden, to the middle of the pack. That is good news for our residents, our small businesses and the people and companies we want to attract to our great state.
Rep. Seth Berry, D-Bowdoinham, represents the communities of Bowdoin, Bowdoinham, Richmond and the Unorganized Territory of Perkins Township. He is the House Majority Whip and is serving in his second term.