AUGUSTA, MAINE — The state’s wealthiest residents have largely avoided the economic and health effects of COVID-19. Meanwhile, Mainers with the lowest incomes, who are more likely to be Black, Latino, and Indigenous, have endured the greatest harm. This lopsided impact reflects harsh, longstanding inequities in education, employment, housing, and health care that the current crisis is making worse.
Maine can reduce these racial and economic inequities and speed up the recovery by ensuring the wealthy pay their fair share through taxes on the highest incomes, capital gains, and inherited wealth, as detailed in a national report released today by the Center on Budget and Policy Priorities. The much-needed revenues from these tax policies can preserve funding for crucial priorities like education, health care, or cash assistance for the families who are struggling to make ends meet.
“By improving the ways Maine taxes wealth, lawmakers can help create a recovery and economy that works for everyone,” said Sarah Austin, tax and budget analyst at the Maine Center for Economic Policy. “This is essential not only for our recovery from the pandemic-related recession, but to build a state where our children and grandchildren can thrive, regardless of race or income.”
In particular, Maine lawmakers can enact the following wealth taxes:
- Millionaires’ taxes: Increase personal income tax rates on the highest incomes. White families are about three times more likely than Black and Latino families to be among the nation’s top 1 percent of earners.
- Capital gains taxes: Tax the income an investor gets when a financial asset is sold for profit. The stock market’s high performance has preserved these profits for many wealthy families.
- Estate taxes: Tax the wealth passed on from generation to generation or raise the rates or lower the threshold at which wealth taxes apply. Inherited income is taxed at less than one-quarter the rate of income from work and savings, and the federal government taxes only the inheritances of the super-rich.
Under the state’s current tax system, middle-income Mainers often pay proportionately more in taxes than Mainers with the highest incomes. During COVID-19, low- and moderate-income Mainers are facing a slow and costly economic recovery, while the wealthy have maintained their standing or even seen their net worth grow. In Maine, high-wage earners (over $60,000 per year) have seen their employment levels rise to 11.7 percent higher than pre-pandemic levels. For low-wage earners (below $27,000 per year), a return is much farther off: Employment rates were 25.5 percent lower in September 2020 than in January 2020.
Tax increases at the top are also better for state economies during a recession than spending cuts. Progressive taxes allow for much-needed public investments that keep money flowing through states’ economies by staving off layoffs and enabling states to maintain purchasing. Unlike individuals with low incomes, wealthy and high-income individuals generally maintain their spending levels regardless of a tax increase.
“Every state has economic, wealth, and racial inequities, and each one — including Maine — can improve the way it taxes its wealthiest residents,” said Samantha Waxman, policy analyst at the Center on Budget and Policy Priorities and lead author of the report. “This is the right thing to do for Mainers and it’s also the sound thing to do to stoke a quicker and more widespread economic recovery.”