ANALYSIS: Gov. Mills’ Budget: New Netflix-Hulu Tax & mobile phone tax, dangerous use of federal dollars

Governor Janet Mills at a press conference related to the COVID-19 pandemic. Mills’ latest budget proposal would implement new taxes and raise spending by over $400 million, despite claims by Mills and her allies in the media.

AUGUSTA – A deep analysis of Governor Janet Mills’ new proposed state budget is flashing warning signs to Mainers concerned about the state’s financial conditions as we approach a full year under Governor Mills’ unilateral Covid-19 restrictions.

While Mills’ has been able to convince traditional media outlets to report that her proposal does not “raise tax rates” and generally report on the budget as if it is flat, the non-profit Maine People Before Politics says the coverage has ignored two new taxes and some serious structural and spending issues. The analysis also shows how, far from being “flat” compared to Mills’ previous budget, it actually increases spending by about $400 million. That represents an increase of roughly 5% in this budget on top of Mills’ previous record spending increase of about 11%.

Any Mainer who pays for any sort of internet streaming service such as Netflix, Hulu, YouTube TV, Amazon Video, Spotify, Pandora or other services would be required to pay a new streaming tax under Mills’ budget proposal. The proposal goes as far as even taxing the purchase of ring tones for your phone.

Mills has tried to push this tax through before, submitting it as a free-standing bill in her first two-years through the Department of Administrative and Financial Services – but the proposal died without a single vote in the Maine Legislature.

In a separate effort, the Mills budget expands the assault on mobile phone users, proposing a per-line tax on all mobile phones and VOIP (Voice over Internet Protocol) lines in the state.

Maine People Before Politics highlighted concerns with the new taxes, saying, “Media reports that this budget doesn’t raise taxes are false. The biennial budget specifically adds new taxes and fees. The Governor and her staff have been careful to say that the biennial budget proposal does not raise “tax rates.” This has been construed by some members of the media to mean that it does not add any taxes or revenue streams.”

The analysis from MPBP exposes a number of other areas of high concern, showing how the Mills budget could create massive future problems by improperly using federal funds to cover state revenue shortfalls by using those funds to cover payroll costs at DHHS. Tactics such as this, MPBP says, are what led to the Baldacci-era budget crisis that resulted in the multi-year effort by Governor Paul LePage to bring Maine DHHS and Maine’s budget back into alignment.

Another concern highlighted by MPBP is the use of federal dollars to fund hazard pay for state workers last year. In the analysis, MPBP explains that Mills lack of planning for the future budget in 2020 has placed the state in the untenable position of ending the hazard pay for state workers because federal funding has dried up as the pandemic worsens. The funding Mills has relied upon was from Federal CARES ACT funds, passed by the United States Congress and signed into law by President Donald Trump.

Under the previous budget, state employees got a 4% pay raise and some received as much as a $5 per hour hazard pay increase above and beyond that pay raise. Now, Mills cannot afford to continue the hazard pay without “significant” layoffs or cuts, but those workers are facing worse pandemic conditions than they did when the hazard pay was in effect.

This opens the state up to facing complaints and grievances, which, if successfully argued, could create major financial stress on Mainers.

The nine-page analysis breaks out a number of other concerns in Mills’ two-year budget proposal. You can read the full analysis here.

“Contrary to media reports, the budget increases spending and adds new taxes. It does virtually nothing to address the shortfall they project for road and bridge repair,” said MPBP in a post on Facebook as they highlighted the analysis.

When Governor Mills introduced the budget, she called the budget “balanced” and said it “tightens our belt” as a state, mentioning the thousands of small businesses struggling to keep their doors open under restrictions and mandates she has imposed.

“At a time when Maine people are hurting, when small businesses are struggling to keep their doors open, when the ranks of the unemployed have swelled, and when we are fighting a deadly virus all around us, we are proposing a balanced budget that tightens our belt, that protects support for children’s education, that saves, and that reinforces public health, child welfare, and public safety measures of great concern to Maine families,” said Governor Mills. “We are focused on keeping Maine people healthy, saving lives, educating our kids, and getting people back to work.”

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