LD 420 would bring Maine in line with other New England states’ efforts to tax wealth
AUGUSTA, Maine — Wealth taxes are one of the most effective tools for addressing economic inequality. Maine has a chance this year to boost opportunity for poor and middle-class families by strengthening its watered-down estate tax, according to a new report published today by the Maine Center for Economic Policy.
“More than half of all wealth is acquired not by virtue of hard work or merit, but through inheritance. The status quo perpetuates inequality across generations, as the wealthiest families leverage their abundant resources to increase their share of the economic pie and pass their wealth on to their heirs,” said Sarah Austin, the report’s author. “The estate tax is Maine’s only tax that’s paid exclusively by high-wealth households. That makes it a crucial element of any plan to reduce inequality and fund vital investments in Maine people and communities.”
Maine’s estate tax is the most progressive part of its tax code but has been watered down over decades. Since 1987, policymakers have more than quadrupled the estate tax exclusion — the amount of an estate’s value that can be inherited tax free. The largest estate tax cuts were enacted under Gov. Paul LePage, who pursued an agenda of tax cuts for the wealthy during his two terms in office.
Because of those cuts, the wealthiest families today can pass on estates worth up to $5.8 million without paying any estate tax at all. That puts Maine out of step with efforts by other New England states — which have smaller exclusions and higher rates than Maine — to use strong wealth taxes to combat inequality.
LD 420, a bill sponsored by Rep. Ben Collings of Portland and up for consideration by the Legislature this year, would reduce Maine’s estate tax exclusion to $2 million, effectively repealing the largest estate tax cut enacted under Gov. Paul LePage. The bill would secure $14 million of much-needed resources annually to invest in public schools, health care, infrastructure and public services that build opportunity for poor and middle-class Mainers.
The bill would bring Maine’s estate tax to the middle of the pack in New England. Even after reducing the exclusion, fewer than 1 percent of estates would owe any estate tax when they were passed on to heirs, according to MECEP’s research.
“Most Mainers are lucky to earn $2 million over an entire lifetime, let alone to be fortunate enough to pass on such a sum to their heirs,” said Austin. “MECEP urges the Legislature to enact LD 420 to combat wealth inequality and boost our ability to invest in the foundations of prosperity for poor and middle-class families.”