This year, the Maine legislature passed landmark tax fairness legislation, creating a millionaire tax. Here’s what you should know.
What is the Maine millionaire tax?
The millionaire tax is an additional 2% tax, (also called a surcharge), on income over $1 million for individuals, and over $1.5 million for joint filers and heads of households. This surcharge is on top of Maine’s existing individual income tax bracket structure. This creates a highest top tax bracket of 9.15%. Only income over $1 million for individuals and $1.5 million for joint filers and heads of household is subject to this surcharge. For example, someone making $1.1 million only pays the 2% increase on the $100,000, equaling an additional $2,000 in taxes.
Maine’s personal income tax brackets, 2026
How much will the millionaire tax raise, and what will the state of Maine do with it?
The state’s Office of Fiscal and Program review and Department of Administrative and Financial Services estimate the millionaire tax will generate $96 million in FY27 and $150 million in the following biennium (FY28-FY29). The funding is not designated for any specific purpose, but goes directly to the general fund, providing a stable funding source for priorities including child care, health care, and housing.
Here are some things that additional money could make possible:
- $12 million per year to increase the property tax fairness credit for homeowners and renters
- $10 million per year for child care assistance for working families
- $20 million per year to boost pay for care workers looking after older adults and people with disabilities
- $12.5 million per year for tuition-free community college
- $7.5 million per year to help households with low income pay their electricity bills
- $6 million per year to raise rural teacher salaries to a $50,000 minimum
- $11 million one-time to keep families from losing their homes to eviction
- $6 million to keep family planning clinics open for uninsured Mainers across the state
- $14 million per year to comply with new federal mandates for SNAP and MaineCare
How will the millionaire tax impact small businesses in Maine?
Years of underinvestment have left Maine’s infrastructure crumbling and programs strained. Maine’s new millionaire tax will help create a state where small businesses can thrive. The revenue will help the state pay for important investments like free community college, child care, and housing that businesses need to have a strong workforce.
Because most small businesses owners in Maine makes less than $1 million in taxable income a year after subtracting expenses from their profits (like equipment, payroll, and utilities) the millionaire tax will not impact most Maine small businesses.
Pass-through entities — small businesses including LLCs, S-corps, and partnerships — are exempt from the millionaire tax, meaning it will not impact their tax filings at the entity level.
The millionaire tax does apply to small businesses that are sole proprietorships or anyone who files taxes for their business on their personal tax return.
Whether a business will be impacted by the millionaire tax depends on the taxable profit and the filing status of the owner(s).
Example Scenarios:
Partnership
Evan and Ciara own a business together 50/50. Their business has $2 million of taxable profit, so they each report $1 million in income on their personal income taxes. The millionaire tax does not impact them.
Sasha and Amalia own a business together 50/50. Their business has $3 million of taxable profit, so they each report $1.5 million in income on their personal income taxes. $500,000 of their income is subject to the millionaire tax surcharge. They each pay an additional $10,000 in taxes.
Carolyn and Thatcher sell their business for $10 million. They each receive $5 million. Over the years they have invested $5 million in capital improvements into the business, bringing their taxable profit from the sale down to $2.5 million each. Further deductions and exemptions bring their taxable income down to $1.5 million each. If either of them is married, they pay no additional tax unless they have other sources of income. If they are single, they each pay an additional $10,000 in taxes on the sale of their business.
Sole Proprietor
John owns a business. He makes $1 million in taxable profit. The millionaire tax does not impact him.
Aadiyah owns a business. She makes $1.5 million in taxable profit. $500,000 of her income is subject to the millionaire tax surcharge. She pays an additional $10,000 in taxes.
Married Filing Jointly
Devon and Colin are married and file their taxes jointly. Their business has $1.5 million of taxable profit. The millionaire tax does not impact them.
Katya and Kofi are married and file their taxes jointly. Their business has $2 million of taxable profit. $500,000 of their income is subject to the millionaire tax surcharge. They pay an additional $10,000 in taxes.
Who will be subject to the millionaire tax?
Any individual making over $1 million and any head of household or married couple filing jointly making over $1.5 million per year will be subject to the millionaire tax. The additional 2% tax is only on income over that amount, meaning there is no additional tax on income less than $1 million for individuals or $1.5 million for married filing jointly. About 2,600 tax filers — .4% of Maine taxpayers’ population — will be subject to this tax.
Will the millionaire tax impact migration?
IRS data shows more people moving into Maine from most lower tax states than out. In Massachusetts, which implemented a 4% millionaire tax in 2022, there has been a decrease in higher income earners leaving the state. Other factors, like job opportunities, proximity to family, and weather, tend to weigh more strongly in people’s migration decisions.
Who supported the millionaire tax?
Polling showed 70% of Mainers supported the millionaire tax. The millionaire tax was sponsored by Rep. Cheryl Golek and championed by Senate President Mattie Daughtry. The Governor signed the millionaire tax into law as part of the supplemental budget.
The Mainers for Tax Fairness Coalition, including MECEP, Maine Immigrants’ Rights Coalition, Maine People’s Alliance, Maine Equal Justice, Maine AFL-CIO, Maine Women’s Lobby, Maine Education Association, Full Plates Full Potential, and Maine Service Employees Association (MSEA-SEIU) advocated for the policy in Maine.
Others including Maine Municipal Association, Maine Association for the Education of Young Children, Maine Children’s Alliance, and Maine Conversation Voters also testified in support.