RELEASE: No double-dip tax breaks for businesses that received PPP grants

AUGUSTA, Maine — Powerful business special interests are pushing the state to enact a double-dip tax break scheme that would take $100 million away from Maine’s COVID recovery.

Lawmakers should reject the business lobby’s efforts to secure more tax breaks at a time of increased hardship for families and communities, according to a new analysis published by MECEP.

“Maine has longstanding needs that have been unmet because our state tax code is riddled with loopholes and giveaways to the wealthy and large corporations,” said Sarah Austin, tax and budget analyst at the Maine Center for Economic Policy. “Those needs are even greater now because of COVID and the economic crisis. Policymakers must prioritize struggling families, cash-strapped schools and communities, and our public health infrastructure — not throw revenue away on new tax breaks for profitable businesses.”

  • PPP was meant to help vulnerable workers, not give another tax break to corporations

The Paycheck Protection Program was created in March 2020 to help businesses keep workers on payroll, putting money in workers’ pockets and stimulating the economy. The program provided forgivable loans to businesses. If businesses used the funds for eligible expenses, such as wages and rent, the loans would be forgiven and converted to grants.

Congress deviated from the program’s original purpose in December when it changed federal tax rules to create a new, double tax benefit for PPP recipients on top of the grant funding they received. Now, Maine must decide whether to conform its own, state income tax code to that shift in federal priority.

  • A double tax break on PPP is unfair

The business lobby, led by the Maine State Chamber of Commerce, has come out hard against Gov. Janet Mills’ original tax conformity plan for PPP, calling it a “tax increase.” That’s not true.

Mills’ original conformity proposal took a sensible, tax-neutral approach to PPP grants. Businesses would claim the grants as income but would be allowed to write off business expenses funded by the federal relief funds, resulting in no net tax impact for PPP grants. The Chamber is demanding policymakers let businesses double dip for tax breaks on both sides of the ledger: One tax break for the grant coming in, and another for spending it.

“Businesses are asking for special tax treatment that no other recipient of federal relief funds receives. For example, workers laid off during the recession will still pay taxes on their UI benefits,” Austin said.

  • The double tax break would do little to help small businesses most likely to be struggling

While PPP helped a number of small businesses in Maine, it also provided federal funding to large corporations who were able to adapt and weather the COVID crisis while still turning solid profits, including multinational corporations that do business in Maine.

The double tax break on PPP grants is poorly targeted to help the small businesses that may need additional support. Because the double tax break for PPP would be tied to the size of grants received and can only be used to reduce taxable profit, the scheme would give the biggest benefit to large businesses that turned large profits.

For context, half of Maine’s PPP recipients received loans worth $9,000 on average, while the top 1 percent of recipients — representing 270 businesses — received loans worth $2 million on average.

  • Maine gets to write its own tax laws

Just because the federal government created a new tax break does not mean Maine must do the same. The state regularly chooses not to replicate federal tax changes in its own state tax code. For example, Maine chose not to adopt many provisions of the Trump Tax Cuts in the state tax system.

“Maine writes its own tax code. Lawmakers have real agency in deciding whether to adopt the same wrongheaded approach as Congress, or to go our own way and protect our ability to invest in Maine’s recovery,” Austin said.

To read Austin’s full analysis on MECEP’s blog, click here.


Mario Moretto
(207) 620-1101