Today, the Legislature’s taxation committee heard public testimony on several tax bills that would help balance the state’s budget without raising taxes on low- and middle-income families.
Three of the proposals would return high-income taxpayers to a top marginal tax rate of 8.5%. One would create a “Buffett Rule” to ensure that high-income Mainers pay a total state and local tax rate at least equal to the state average. The fifth would replace the three tax brackets in our current state personal income tax with seven tax brackets, including a top marginal tax rate of 13% for income over about $250K.
MECEP Executive Director Garrett Martin testified today on these proposals and you can read his testimony here.
We need more information about the fiscal and distributional impacts of these bills, but each would represent an important first step toward tax fairness for low- and middle-income Mainers. Remember, under Maine’s current state and local tax system, low- and middle-income families pay more on every dollar of income they earn than the very highest-income earners. Any one of these bills would help make Maine’s tax system fairer.
Tax fairness is only one reason why these bills deserve consideration. The other is the fact that state revenue has collapsed in the wake of the Great Recession and the unpaid-for income, estate, and pension tax cuts enacted in 2011. Adjusted for inflation, General Fund revenue in the FY 2014-2015 biennium is forecast to be lower than in any two-year budget period since the end of FY 1997 and a billion dollars below what it was in the FY 2006-2007 biennium. As a result, the state is facing an $880 million budget gap over the two-year period beginning in July, 2013.
We must close this budget gap with a combination of spending cuts and revenue increases. The Governor’s budget proposal raises new revenue primarily from low- and middle-income families—by eliminating property tax relief programs and by shifting costs to property taxes, which disproportionately affect low- and middle-income Mainers. In contrast, the bills heard today in front of the taxation committee raise revenue from high-income households.