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By Rep. Leila Jane Percy
July 15, 2009
I am serving my seventh year and fourth term as a State Representative. I have been through four election campaigns and survived a round of redistricting. A lot can change in seven years, but one thing that has never changed is the large number of my constituents who told me that they would like to pay less in taxes.
I have always made the commitment to work towards tax relief for Mainers and been frustrated when, year after year, the Legislature has been unable to accomplish this worthy goal. In my time of service, the Legislature has reduced the size of state government by shrinking programs, cutting spending and reducing the workforce. Anyone who tells you differently can’t do honest math. However, this has not led to a significant reduction in the overall tax burden for Maine residents. Even after these cuts, there simply wasn’t enough revenue to expand the state’s commitment to education (as required by the people’s referendum), maintain roads and bridges, and fund the programs and services – from health care to economic development – that provide so many jobs important to the local economy. The state funds going toward redevelopment of the Brunswick Naval Air Station is just one example.
Given all these fiscal barriers (not to mention the purely partisan interests that a minority of elected officials sometimes prioritize over good policy) it is with great pride that I can now report the successful passage of a tax reform law that will reduce the taxes of the vast majority of Mainers.
Due to the new law, close to 90 percent of Maine residents will have MORE MONEY in their pockets and over 95 percent will see a cut in their income taxes. The recently signed law reduces the top income tax rate by over 20 percent. To be clear here, Maine’s top tax bracket does not simply include the wealthiest among us. Because the top rate in Maine kicks in at such a low income level, next year any individual making just over $20,000 would have paid at the current 8.5 rate. The vast majority of Mainers pay taxes at the top rate.
Also, the new tax structure will provide enough credits to low income tax payers and seniors that their new tax rates will also be lower than their current rates. There has been a great deal of confusion about this issue in the press. Some of this confusion has been intentionally created by a small group of partisan operatives, but a good deal of it is simply honest citizens trying to understand a complicated law. It is also important to remember that this new law has no impact on your federal taxes or property taxes which are imposed by towns or cities.
The new law replaces personal exemptions and standard and itemized deductions with household credits on state tax returns. This gives Maine the ability to have a more progressive tax structure and return all the benefits of the income tax cut to Maine residents. The new credit system does not affect business deductions or other modifications that lower a taxpayer’s adjusted gross income (AGI) as calculated on your Federal tax return and reported on your State tax return. Roughly 75 percent of Mainers currently take the standard deduction, which will now be replaced with the Standard Household Credit. People who currently itemize can choose the Alternative Household Credit. Taxpayers 65 years old or older are also eligible for a special elderly credit in addition to the other credits and the tax reform package makes the Earned Income Tax Credit partially refundable. There is simply not enough space available in this column to lay out all the relevant figures, but I strongly encourage readers to visit www.Mainetaxreform.org to learn more about these credits and refunds. If you don’t have easy access to the internet, call me and I will arrange for you to receive the information you need.
I am confident that Maine taxpayers will benefit in several ways from the passage of this tax reform package that as voters you have consistently asked us to pass. Not only will the new tax structure cut Mainers’ income taxes by over $120 million next year, but it also has given Maine national recognition as a business friendly state. This has the potential to benefit all Mainers through the resulting economic development it will encourage. National business friendly media and non-partisan taxpayer organizations have praised Maine for enacting this new law when many other states are raising taxes. The conservative national newspaper of record for business interests, the Wall Street Journal, has dubbed the new law, “the Maine Miracle.”
I will explore the other vital aspect of this new law next month when I go into some detail regarding the expansion of the sales tax and the resulting stability to Maine’s future revenue and budgeting. However, it must be made clear that Maine’s income tax will still move from being one of the highest rates in the nation to the middle of the pack because the tax reform law LOWERS Mainer’s taxes by over $57 million, even AFTER the expansion of the sales tax. I repeat, even after paying a sales tax on some services that were not previously taxed, almost 90 percent of Maine residents will have LOWER taxes next year.
As always you can contact me at 207-389-2133/e-mail: Rep. Percy
Stay well,
Rep. Leila J. Percy