Pandemic Tax: Gov. Mills offers compromise that would still punish Maine businesses that support tens of thousands

Governor Janet Mills signs a bill into law in 2019. Looking on is Senator Shenna Bellows, who recently became Maine Secretary of State.

AUGUSTA – After massive public outcry followed by her Democrat allies on Maine’s Taxation Committee twice refusing to eliminate Janet Mills’ proposed tax on the pandemic relief funds provided to Maine small businesses, Janet Mills is now proposing a plan to eliminate the tax on some of those businesses.

While the news comes as a relief for some who were facing the tax on federal relief funds they received in the early months of the pandemic, Republicans in the legislature say Mills is still picking winners and losers in the economy.

Compounding matters for Mills, late Wednesday a watch dog group that tracks much of what Mills does says she still has not addressed the underlying issues in her budget, which stems from the growth of state spending by record numbers since she took office in early 2019.

In response to Governor Mills’ proposal, Maine House Republicans issued a statement saying the proposal still would punish Maine businesses that employ tens of thousands of Mainers.

“The Governor’s latest proposal will leave out federal relief for over 251 Maine businesses that employ more than 40,000 people (19% of PPP affected employees),” said House Republican Leader Kathleen Dillingham (R-Oxford). “It is not fair to provide relief to some employers, while leaving out others.”

Republicans say the Governor’s original proposal meant taking an estimated $125 million away from Maine businesses trying to survive and recover from nearly a year’s worth of lost income, revenue losses and worker layoffs.

“This is about keeping hardworking Mainers in their jobs,” said Senate Republican Leader Jeff Timberlake (R-Androscoggin). “This pandemic is far from over. Businesses need this $20 million to keep their doors open and people employed. It is an investment in our economy and the many thousands of workers and the families who depend on them.”

Maine People Before Politics, a group well known for tracking key moves made by Governor Janet Mills and her administration, says this is the third time in fifteen days Mills has changed recommendations on the pandemic tax.

MPBP says the new proposal still leaves Mills $82 million short in balancing Maine’s budget with a key deadline fast approaching. They say Mills’ new proposal includes taking $20 million from Medicaid Reimbursement funding and more than $60 million Mills had originally earmarked to replenish the state’s Rainy Day Fund.

One budget balancing tactic Governor Mills has not proposed is reductions to her massive spending increases, which dwarf the size of the current budget shortfall.

“No spending cuts are proposed, only spending the cash on hand. Governor Mills refuses to admit that her spending proposals might have been, and continue to be, more than Maine can afford,” said MPBP in their analysis.

Democrats on the Legislature’s Taxation Committee were not spared criticism either, with MPBP highlighting how the group had avoided recent proposals to eliminate the pandemic tax by blaming their lack of action on a recent snow day.

The problem with that excuse? The Taxation Committee has been working remotely due to the pandemic and conducting all their business via Zoom.

At another point, a Taxation Committee Democrat claimed to be having trouble reading the committee materials during the Zoom meeting, and when all else failed, MPBP says, Democrats just use procedural maneuvers for over two hours to avoid the vote.

As it stands, Republicans who opposed the tax from the start appear to have scored a major victory for most Maine businesses that were staring down the barrel of Governor Mills’ pandemic tax.

However, in their view, leaving businesses that employ more than 40,000 Mainers in Governor Mills’ grip on this tax is a bridge too far.

With so many businesses having been shuttered under Governor Mills restrictions over the past 11 months, it is unlikely there will be a surprise revenue bump between now and the state budget deadline, a renewed push for an alternative to Mills’ pandemic tax may be in the cards. Given the intransigence of Taxation Committee Democrats to vote down the initial proposal from Mills, it is unlikely this chapter of Maine’s state budget debate will be closed any time soon.

In a statement released by Governor Janet Mills’ office, Kirsten Figueroa, Governor Mills’ Commissioner of the Department of Administrative and Financial Services, seemed to try to shift blame for the issue to the federal government.

“Moving forward, we hope that as the Federal government makes changes to the tax code, it will keep in mind the resulting impacts on states like Maine and provide the appropriate level of support,” said Figueroa.

Figueroa’s quote suggests that the Mills Administration still believes they are owed a share of the funds provided to businesses through the Federal Paycheck Protection Program or some form of compensation commensurate to that relief.

That position runs counter to the bipartisan intent of the PPP Program and the actions of most states, which have not imposed a state income tax on the funds.

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