This week, the Legislature’s Taxation Committee narrowly approved a bill that would raise more tax money from top wage earners in Maine by tacking a 3 percent surcharge on taxable income over $200,000.
The vote came during debate over 10 bills that sought to change the state’s tax brackets or add surcharges on top earners.
The 6-5 party-line vote on the surcharge bill with Democrats on the committee backing the measure and Republicans opposing it came as lawmakers rejected eight other bills to either raise taxes on top earners or create a straight 5 percent tax rate.
If approved, the bill would increase state tax collections by $209 million a year, according to analysis of the bill. However, the measure could face an uphill battle in the Legislature even though Democrats have argued it mirrors a statewide ballot measure that voters passed in 2016 but was later overturned by the Legislature following a state government shutdown.
The committee narrowly voted to defer immediate action on the bill and decide later whether to carry it over into the next legislative session for further debate.
The conversation about taxes in Maine comes against the backdrop of a national debate over whether Congress should approve a proposal by President Biden to increase the federal corporate tax rate to pay for sweeping infrastructure upgrades. Federal corporate income taxes were slashed from 35 percent to 21 percent under former President Donald Trump.
The bills before the committee would have done everything from bumping the state’s top tax bracket to more than 12 percent to creating a flat 5 percent tax for everyone. Two other measures defeated this week in the tax committee also would have created surcharges on high earners.
The bill that moved forward would also bump the state’s earned income tax credit so it would match the federal earned income tax credit, which provides a tax credit to low income earners based on the number of dependents they have. The state currently allows an earned income tax credit that is between 12 and 25 percent of the federal credit for filers eligible for it.
Another surcharge bill, offered by House Speaker Ryan Fecteau, D-Biddeford, would have created a temporary surcharge on high wage earners, using the proceeds from the bill to pay grants to essential workers on the front-lines of the COVID-19 pandemic for 2020 and 2021.
The vote to table Terry’s bill and add it to a list of bills to be considered in the next session of the Legislature in 2022 split 6-5 along party lines, with Republicans opposing it. The votes to kill the remaining bills were mostly unanimous and bipartisan, with only one proposal drawing a 10-1 split vote.
That measure would have created a 5 percent flat income tax for all wage earners in Maine. It also would have punched a $500 million a year hole into the state’s budget, based on an estimate from the Maine Revenue Service.
In arguing against most of the bills, Republicans made the case that state revenues have continue to grow even after a series of state income tax cuts made under former Republican Gov. Paul LePage lowered the state’s top bracket to 7.15 percent. They also said when Mainers are allowed to keep their money they spend it in Maine, providing jobs and supporting local economies that generate more tax revenue.
The Democratic sponsored measures would have raised increasing amounts of revenue for the state each year, ranging from about $62 million to more than $359 million.
It is unclear exactly when the committee will revisit the issue, but it is unlikely to happen before the end of the current special legislative session, which is set to end in June.