Following Gov. Mills’ spending increases, income tax hikes proposed in Augusta for 2021, 2022

Governor Janet Mills poses for a photo outside the United Nations building in New York during her first year in office.

AUGUSTA – Average Maine families, many with household incomes below the state average, would see a tax increase if a group of Democrat lawmakers in Augusta have their way.  The proposal comes as lawmakers face shortfalls in the state budget brought on by Gov. Janet Mills’ record spending increases and an economy that could generously be described as limping, as Maine starts 2021.

In her first two years in office, Governor Janet Mills broke records with a massive spending increase of about $800 million, about an 11% spike, in her first state budget.

Late last week, two bills were released that would raise taxes on individuals and Maine small businesses. While one of the bills is certain to be framed as “taxing the rich” in keeping with standard liberal talking points on tax hikes, the devil is in the details. In the case of these tax increases, the details show that working Mainers, including some who earn below the median or average household income, would see their income tax rate increase by as much as 14%.

One bill, LD 495, purports to increase the “progressivity” of Maine’s tax code, but the text of the proposal shows that it would hit middle class Maine households earning between $50,000 and $100,000 per year with an income tax increase of more than 14%.

On top of that, households earning over $100,000 per year would see their income tax rate increase by 38%, with the creation of a new income tax bracket at 11.5%, which would increase those households’ income from 7.15%.

Maine People Before Politics, a non-profit that tracks public policy and legislation pointed out that the tax increase would hit Maine families who earn below the median Maine income.

Put another way, the individual income tax increase would target a family of four that qualifies for state assistance under the state’s published Medicaid income limits, in the interest of making Maine’s income tax “more progressive.” In Maine, a family of four can earn $56,448, or $4,704 per month and qualify for MaineCare, Maine’s Medicaid assistance program.

Another bill, put forward to target Maine businesses with an income tax increase, would raise the business income tax by 27% starting in 2022.

Currently, Maine’s business income tax rate is 8.93% but that would increase to 12.4% in 2022 under LD 501.

LD 495, which would increase individual income tax rates on households earning $50,000 per year or more is sponsored by Representative Laurie Osher (D – Orono).

LD 495 is cosponsored by Senator Ben Chipman (D – Cumberland) and Rep. Ben Collings (D – Portland), Rep. Lynn Copeland (D – Saco), Rep. Lori Gramlich (D – Old Orchard Beach), Rep. Victoria Morales (D – South Portland), Rep. Lois Reckitt (D – South Portland), Rep. Amy Roeder (D – Bangor), Rep. Denise Tepler (D – Topsham) and Rep. Lynne Williams (D – Bar Harbor).

LD 501, which would increase business income tax rates by 27%, is sponsored by Rep. Heidi Brooks (D – Lewiston) and cosponsored by Senator Ben Collings (D – Portland), Rep. Margaret Craven (D – Lewiston), Rep. Lori Gramlich (D – Old Orchard Beach), Rep. Maureen Terry (D – Gorham) and Senator Ben Chipman (D – Cumberland).

Both bills have been referred to the Legislature’s Joint Committee on Taxation but no public hearings or work sessions have yet been scheduled.

Over the past few weeks, lawmakers have been embroiled in a debate over Governor Janet Mills’ attempt to impose a tax on the pandemic relief Maine’s small businesses received from the federal government, with a top Mills Administration official insisting Maine could not afford not to tax the pandemic relief funds. Mills backed off that across the board attempt, but she and her allies continue to push for the state to impose a tax on some of the pandemic relief funds.

You can track LD 495 at this link.

You can track LD 501 at this link.

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