Maine’s pandemic experience has looked very different depending on where you stand in today’s economy.
Essential frontline workers, many of whom were underpaid and experienced poor working conditions even before the pandemic, took on tremendous risk to their own health and the health of their families in order to keep our society running.
Households with higher income and more wealth, meanwhile, largely were able to reduce their own risk to COVID by working remotely. Research also indicates that these households saw their share of society’s wealth grow over the course of the crisis, thanks to a tax and economic system that’s already built in their favor.
Lawmakers this year have an opportunity to recognize the tremendous sacrifice and efforts of Maine’s frontline workers — including but not limited to those who work in health care, food and agriculture, grocery stores, public transit, and education — by asking those at the top to pay an additional 3-cent tax on high incomes.
The bill — LD 1677, “An Act to Support Frontline Workers by Adding a Temporary Tax Bracket Affecting High Earners,” sponsored by Speaker of the House Ryan Fecteau — would provide hazard payments to frontline workers who have continued working through a dangerous and unprecedented pandemic.
The hazard payment program would be funded by a new, temporary 3 percent tax on single taxable income over $200,000, head of household income over $350,000, and married joint income over $500,000 and return the revenue through direct payments to frontline workers.
The tax would be in place for tax year 2021 and 2022. The 2021 tax would deliver a payment to workers who served in frontline jobs in 2020 and the following year’s tax would deliver a payment to workers in frontline industries this year. The tax would affect only the top 1 percent of households in Maine and would raise roughly $96 million per year for payments for frontline workers.1 The payment amounts would be determined in rulemaking by the Department of Labor.
Inequality was a hallmark of the pandemic
Wealthy households can afford to contribute more to our pandemic recovery. Those at the top have remained economically stable or better throughout the pandemic. High-income workers in Maine experienced relatively few job losses, and their job markets are now doing better than before the pandemic started, with high wage jobs up 15.9 percent since January 2020.2
Those gains come against a backdrop of a state tax system that already asks less of the top 1 percent than it does of middle-income families. According to analysis from the Institute on Taxation and Economic Policy, the top 1 percent in Maine pays an average effective state and local tax rate of 8.56 percent, compared to 9.5 percent for the middle quintile of households by income.
Wealthy households have also benefited most from huge gains in the stock market in 2020 and are the most likely to have been able to work safely from home through the pandemic.
Even in the earliest days of the pandemic when we knew so little about the virus and which transmission prevention strategies would be most effective, some industries never shut down or went remote. Grocery stores, gas stations, hospitals, and many food and manufacturing workers stayed on the job so that others could stay safe in their homes.
Teachers and childcare workers have upended their systems and schedules to deliver quality care and education for our children. Many of them having at least a portion of their jobs working in person with the children they serve.
3-cent tax to fund hazard payment would help workers, advance tax fairness
This bill would recognize the service of these workers in the face of great uncertainty and elevated risk of deadly illness. Many of these industries are overly represented by women, many of whom have had to juggle harder to find childcare to report for work.3
If lawmakers approve LD 1677, Maine will join states including Vermont, Pennsylvania, and Louisiana, all of which have created grant programs for frontline workers.4
The bill also shows the kind of bold action Maine can take to support workers and families by asking those at the top to contribute more of their fair share in taxes. While this proposal funds a temporary program with a temporary surcharge on high incomes, lawmakers must also consider long-term tax fairness solutions so that policymakers can continue to make economy-boosting investments in Maine’s people and places.
In the meantime, for just 3 cents of tax on every dollar of income above $500,000 for wealthy couples, we can recognize the workers who have kept our economy running through crisis. Lawmakers should take that deal.
Notes:
[1] Analysis from the Institute on Taxation and Economic Policy. Modeled with 2019 incomes.
[2] Chetty, Raj, et al. “Percent Change in Employment, Maine.” Opportunity Insights Economic Tracker. Accessed May 5, 2021. https://www.tracktherecovery.org/
[3] Austin, Sarah. “Coronavirus relief for frontline workers has big implications for gender and race equity.” Maine Center for Economic Policy. April 14, 2020. https://www.mecep.org/blog/coronavirus-relief-for-frontline-workers-has-big-implication-on-gender-and-race-equity/
[4] Kinder, Molly, Laura Stateler, and Julia Du. “The COVID-19 hazard continues, but the hazard pay does not: Why America’s essential workers need a raise.” Brookings. October 29, 2020. https://www.brookings.edu/research/the-covid-19-hazard-continues-but-the-hazard-pay-does-not-why-americas-frontline-workers-need-a-raise/
