For Immediate Release: Thursday, August 16, 2018
Contact: David Heidrich, Director of Communications
Department of Administrative and Financial Services, (207) 624-7800

State Economist Issues Report on Economic Consequences of Home Care Referendum

AUGUSTA – Today, the Office of the State Economist, an office within the Maine Department of Administrative and Financial Services (DAFS), formally released its economic impact analysis of the proposed universal home care ballot initiative. A copy of the report was transmitted to the members of the Maine Legislature’s Joint Standing Committee on Appropriations and Financial Affairs and Joint Standing Committee on Taxation.

Formally known as “An Act To Establish Universal Home Care for Seniors and Persons with Disabilities”, Question 1 is the only initiated bill that will be presented to Maine voters during this November’s referendum election. The proposal would create three different taxes—a 1.9 percent excise payroll tax on employers, a 1.9 percent wage income tax on employees and a 3.8 percent income tax—on individuals and families with wage or combined household income of more than $128,400. The goal of the report is to provide a transparent, detailed analysis of the likely impacts of the surtax on our economy.

“The results of the State Economist’s analysis indicate that Question 1’s new taxes would be detrimental to Maine’s economy,” said DAFS Commissioner Alec Porteous. “One of the more compelling findings contained within the analysis is the estimated loss of $1.4 to $2 billion in total personal income among Mainers over a five-year period. At a time when the Maine economy is strengthening and Mainers have increasing levels of disposable income, imposing this tax would create new, unnecessary headwinds in the economy.”

The State Economist estimates that the new taxes would have a negative effect on Maine’s population, labor force, personal income, employment and gross domestic product (GDP).

“We have worked diligently over the recent months to estimate the response of Maine’s economy to the policies included in Question 1,” said State Economist Amanda Rector. “The result is a report that applies reasonable assumptions to the State of Maine’s baseline economic forecast and conservatively estimates considerable harm to our state’s economy.”

The report finds that Maine’s population, personal income, and real GDP are all adversely affected by out-migration and reduced in-migration, particularly among higher income taxpayers. In addition, while private non-farm employment eventually returns to baseline levels, the newly created jobs are lower-wage positions, as evidenced by the fact that total personal income losses remain throughout the first five years of the program. 

Read More:
Report on the Likely Economic Impacts of the Proposed Universal Home Care Program
DAFS Public Comment: Commissioner Porteous’ Letter to Secretary Dunlap
February 1, 2018: Report of the Consensus Economic Forecasting Commission

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