Maine: Governor hopes to mitigate impact of income tax increase

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By way of the outcome of the Public Education Surcharge Initiative (Initiative) that was on the ballot in Maine last month, the tiny state containing just 1.3 million people is set to have the second highest income tax in the nation, according to Maine’s Gov. Paul LePage. 

The Initiative, also known as the Maine Tax on Incomes Exceeding $200,000 for Public Education Measure, passed, barely, by 50.4 percent to 49.5 percent. It created a new 3 percent tax on individual income taxes for household income greater than $200,000; a household with an income of $280,000 will pay an additional 3 percent on $80,000 annually. The Initiative is expected to generate approximately $142 million annually, and an additional $12 million or more each subsequent year. 

As a result of the very thin margin by which voters approved the Initiative, opponents, led by the National Federation of Independent Business (NFIB) requested an official recount, reported the NFIB’s Maine state director predicted that the Initiative “will actually tax small business owners more than it taxes a company like Walmart…[t]he corporate tax rate is less. We don't need to be raising taxes on small business owner[s], we need to help them create jobs.”

Maine’s Secretary of State had planned to begin the recount on December 1, 2016, but the NFIB called off its effort, pointing to concerns about the recount procedure, its cost, and the low probability that a recount would overturn the election result, according to the Portland Press Herald.

Thus, the tax increase will go into effect as planned, 30 days after Gov. LePage proclaims the official results of the election. Even so, the Governor is now urging lawmakers to consider the consequences of both the tax increase and the hourly minimum wage increase, to $12 by 2020 from $9.00 in 2017 (currently $7.00), that voters also approved, 55.5 percent to 44.5 percent. 

In his letter to the legislature, Gov. LePage pressed them to “lessen the impact” of both measures, arguing that they “will cause significant economic harm to restaurant workers, small businesses, successful people and our elderly.” Maine’s median household income, in 2014 dollars, between 2010-2014, was $48,804. The per capita income in the past 12 months, in 2014 dollars, was $27,332. 13.4 percent of Mainers live in poverty. 

In his letter, the governor opined that the income tax increase “could actually do the opposite of what the question proposed,” resulting in less money for education. He explained his position on these grounds:

Punishing Maine people and small businesses by increasing their income tax by 42 [percent] will drive them out of our state and prevent badly needed professionals, such as doctors, dentists, engineers and scientists, from coming here. No one wants to come to a state that will confiscate over 10 percent of their earnings, especially when other states, such as our next-door neighbor New Hampshire, take none.

Successful people and small business owners already pay a significant amount of property tax, income tax, excise tax, sales tax, payroll taxes and other taxes and fees. If they go out of business or leave the state and take their income with them, this will create even less revenue for schools and municipalities.

Maine needs more population, and we need more trained professionals. Taking a bigger share out of their hard-earned paychecks is not the way to do it. We may as well put up a big sign in Kittery that says: “Welcome to Maine: We’ll Tax the Heck Out of You!

Gov. LePage promised to put forth a balanced budget that reduces the income tax rate to mitigate the effect of the Initiative. The process will begin in January.

In the meantime, a recount of Ballot Question 1, the Maine Marijuana Legalization Measure, began on December 5, 2016, and could take a month to complete at a cost of $500,000. Voters legalized recreational marijuana with 50.1 percent of the electorate approving it. Medical marijuana has been legal in the Pine Tree state since 1999.

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