The Taxation Committee reported out an amended version of LD 229, a bill that creates two new top income tax brackets for higher earners and lowers the bottom bracket from 5.8% to 5.5%. At a time when the state is facing a budget shortfall and cuts to crucial programs, the bill would raise over $100 million in the next biennium and over $176 million in the following one — plus millions more for municipal revenue sharing.
Legislators reported the bill out of Committee on party lines, with unanimous support from Democrats. A similar bill proposed by Republican Representative Mickey Carmichael during the 131st Legislature received bipartisan support but was vetoed by the Governor.
The bill would increase taxes on high earners, while providing an income tax cut of $50-$150 per year for people with middle to upper middle income. Lower income earners will see little to no benefit, due to Maine’s already high standard deduction and personal exemption, and existing refundable tax credits like the Earned Income Tax Credit (EITC). Income tax rates are applied to adjusted gross income — the amount of income taxable after deductions and exemptions are applied. Because of Maine’s graduated tax bracket structure, even those with the highest incomes will still see a reduction in taxes on the first $27,450 of their income for single filers, and $54,900 for those married filing jointly.
Overall, this bill moves our tax code in the right direction by making sure wealthier individuals pay a higher percentage of their income in taxes. When a state’s income tax is more progressive, it helps offset the regressivity of other sources of revenue like sales and property taxes. LD 229 is a step forward in making Maine’s tax system fairer, more balanced, and better equipped to fund the services our communities rely on.
