New tax proposal would guarantee wealthy pay as much as everyone else

Today, most of Maine’s middle class and working families are paying a higher effective state and local tax rate than the top 1 percent of households.[i] A bill before the Maine Legislature — LD 1647, “An Act To Provide Tax Fairness to Maine’s Middle Class and Working Families” — would move us toward a fairer tax system in which the wealthiest households pay at least the average effective tax rate that the rest of Mainers pay.

This bill would assess a minimum tax rate on Maine’s top one percent that is equal to the average effective state and local tax rates paid by the bottom 99 percent of households. A filer in the top one percent of households would calculate their taxes normally then compare that amount due to what they would owe if they paid the state and local average effective tax rate. The higher amount of the two would be the household’s tax owed under LD 1647.

This bill also expands the homestead exemption from $20,000 to $25,000 and lowers the income threshold over which the property tax fairness credit accrues from six to five percent of income. These changes help mitigate the pressure rising property taxes have created on low- and middle-income families.

The bill also doubles Maine’s Earned Income Tax Credit. This EITC is one of the greatest tools for improving the economic security of working Maine families and simultaneously improving the fairness of our tax code. While we support the increase in this bill, we hope the committee will favor the more robust proposals found in LD 104 and LD 1491.

This bill would link the fate of all Mainers in tax policy decisions. Future increases to regressive sales and property taxes would be met with the certainty that the very wealthiest families were sharing in the tax increase at least as much as the average Mainer.


Notes

[i] Institute on Taxation and Economic Policy. 2018. Who Pay’s 6th Edition. https://itep.org/whopays/maine/