Report from the Statehouse: TAX Committee Work Session May 13

By Stephanie Philbrick

Scheduled first on the agenda, LD 1367 was moved to the end so that employees from Maine Revenue Services could attend.

The session began with discussion on LD 76 and LD 1095, both concerning tax fairness credits and “circuit breaker” deductions. The Property Tax Fairness Credits replaced the circuit breaker or Property Tax and Rent Refund program last year. Rep. Goode said that he had been contacted by many constituents who were surprised to find they no longer get the refund they used to get and had come to rely on. Despite some very detailed discussion about tax formulae and percentages, there didn’t seem to be much interest in the bills outside of Reps. Libby and Goode. Since the Appropriations Committee hasn’t finalized their work, many felt that they couldn’t address these bills because so many of the measures before Appropriations impact other bills and any revenue/expense in these two bills would be based on guesses. So, with time winding down in the Legislative session, LD 76 was tabled and LD 1095 was ONTP with a divided report.

The TAX Committee is an engaged group and I was impressed with how prepared they seemed to be to discuss the minutiae of taxes. And, twelve of the members were there. A for Attendance! Unfortunately, the session didn’t draw a lot of public visitors and, as far as I could tell, most of the attendees were from Maine Revenue Services and other States agencies.

LD 1367 (RESOLUTION, Proposing an Amendment to the Constitution of Maine To Eliminate the Income Tax)

This is the Governor’s bill and not to be confused with LD 409 which also proposed to end the income tax (our testifimony on LD 409). There was some interesting discussion in the beginning, with details coming from Julie Jones, Policy Analyst for the Committee, and from Maine Revenue Services. The major details were:

  • Based on the current budget and without any additional revenue sources, the loss of revenue to the State would be $1.7 billion.
  • If sales tax is raised the budget deficit is projected to be a lot less.
  • Municipal revenue sharing is likely to decrease by 90%.

This bill aims to end the income tax in 2020 (though it was unclear if this meant as of January 2020 or for the earnings in 2020) leaving the State to find alternative sources of revenue to fund the budget. No plan or sample budget outlining cuts or revenue streams accompany the bill – and this is a point that frustrated many members of the committee.

It was a long discussion and, once the details were cleared up, it quickly divided along party lines. Three times it was predicted that Maine’s economy would rise out of the “doldrums” if we get only rid of income tax. On the other side, it was predicted that K-12 education would be defunded, and we would find ourselves in the same predicament as Kansas if we get rid of income tax. The Committee went into caucus for the second time today — after Rep. Russell made a wild (and perhaps emotional) motion to pass the bill amended to say that as a result all k-12 schools would close, programs would lose funding, roads wouldn’t be maintained, etc. Discussion was — if not heated– definitely getting warm by this point. Rep. Seavey said, “We need to analyze the Kansas situation, but we aren’t cutting the budget by $1.7 billion. There will be a budget, and it will be balanced. No question there will be cuts…. But this must change because income tax is partly responsible for Maine’s doldrums.”

Rep. Sukeforth worried that there was no spending plan with this bill. “If the Governor thinks this is such a good idea why is he waiting until 2020 to enact it?” he asked. “Why doesn’t he apply it sooner so that he can apply it to his final budget while in office?”  He continued, “He should propose a budget without income tax in the next budget, and then we could see a plan and address a constitutional amendment then.”

And finally, Rep. Russell was concerned with the timing of voting on a constitutional amendment this coming November. We learned that, by law, constitutional amendments must go to the voters the November following passage by the Legislature. But, Russell contended, we should be presenting an issue this important to voters in a presidential election year when the largest number of voters turn out at the polls.

In the end the uncertainty of the result – because there is no plan or budget based on this, we don’t know what would be funded or not – and, ultimately, this is what swayed the majority of votes.

Action: An OTP motion failed 5-7; ONTP succeeded 7-5, with a divided report.

 

 

 

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