Gov. Janet Mills will tax Maine small businesses $100 million on fed COVID relief funds

Gov. Janet Mills holds up a proclamation last year in her office.

AUGUSTA – Should the state of Maine impose a tax on the federal emergency loan funds sent to Maine’s private businesses who were forced to shut down last year?

For a lot of Maine business owners who received such federal funds through the Paycheck Protection Program signed into law by President Trump last year just so they could stay afloat, the following news is probably going to add insult to injury coming from Governor Janet Mills. After all, most of them struggled to stay in business under the mandates and stay-at-home orders issued by Mills last year with many still struggling now.

But the news those Maine small business owners don’t want to hear has been delivered – Governor Mills is moving forward with a plan tax them about $100 million on those emergency funds through the PPP to keep her proposed state budget balanced.

Those business owners being hurt by the tax and news that Mills will not relent in her money grab, however, would argue that in lean times they were forced to cut back and that Governor Mills’ should in her state budget too.

That sort of argument didn’t seem to matter much to liberal allies of Janet Mills or the Governor herself as the Maine Legislature’s Appropriations Committee met to review Mills’ state budget proposal on Monday.

In total, Governor Mills’ budget-balancing trick amid the ups and downs of COVID-19 relies on taxing the Maine businesses that received PPP funds about $100 million on the funds they received, a massive tax that the federal government and most states have made adjustments to avoid.

The common thinking in those states and at the federal level has been that if a business had faced such dire circumstances due to state-mandated shut downs such as Gov. Mills placed Maine under for much of 2020, or the general economic conditions of the pandemic, they should not be put under the gun to pay state and federal taxes on those funds as if it were profit.

Apparently, Governor Janet Mills disagrees, at least as far as she wants to use those funds to balance a state budget that has exploded state spending to record levels over the past two years.

In Augusta, Republicans blasted Governor Mills’ proposal, releasing a statement in which all four Republican legislative leaders weighed in.

Senate Republican Leader Jeff Timberlake said some of these same small businesses are barely “hanging on as it is” and taxing them on PPP funds would be “devastating.”

House Republican Leader Kathleen Dillingham took DAFS Commissioner Kristen Figueroa, who represents Mills, to task for saying that the federal government’s actions would help small businesses but not taking action to provide the same relief to Maine’s businesses.

Senator Matt Pouliot, the Assistant Senate Leader, said now is not the time to put these small businesses, their employees and Maine’s economic recovery at risk.

Assistant House Leader Joel Stetkis said, “Fifty-seven percent of Maine people are employed by small businesses and they should be a priority of this proposal rather than having the administration use this money to increase their own coffers.  Once again we see state Democrat politicians putting themselves in front of the working people of Maine.”

In a twist, the non-profit group Maine People Before Politics put out a release highlighting that Governor Mills instructed Maine Revenue Services to create forms and software reflecting the changes she chose, without even allowing legislative input – suggesting Mills is likely to oppose any changes that would save Maine small businesses from this tax problem.

The National Federation of Independent Businesses, the Maine Chamber of Commerce and Maine Society of CPAs all testified in opposition to Governor Mills plan to tax federal emergency relief loans today in Augusta.

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