Stop Tax Increases on Maine Working Families and the Middle Class

During the 125th Maine Legislature, Governor LePage insisted on more than $430 million in tax cuts that mostly benefit wealthy Mainers. He got his way. Wealthy Mainers got enormous tax cuts. Now the bill is due.

The Governor plans to balance the budget entirely on the backs of local communities, K-12 schools, and low- and middle-income Maine residents. He is asking for virtually nothing from wealthy Mainers.

This week is our chance to tell Governor LePage and Maine legislators that it is unacceptable to balance the budget by raising taxes on the poor and the middle class and slashing funding for our local schools and communities. Wealthy Mainers must pay their fair share.

On Wednesday March 13, the Legislature’s tax and budget-writing committees will accept public comments on the tax provisions in the Governor’s proposed state budget for the two-year period beginning July 1st, 2013. Approximately $430-440 million of the $881 million budget gap is due to income, pension, and estate tax cuts enacted over the past two years. Remember, the vast majority of the benefits of those tax cuts went to high-income families.

  • 2011 Income Tax Cuts: According to Maine Revenue Services data, over 40% of the benefits of the income tax cuts went to the richest 10% of Maine households- those with expanded incomes over $121,000. Over 60% of the benefits of the income tax cuts went to the richest 20% of Mainers.
  • 2011 Estate Tax Cuts: These tax cuts only apply to Mainers with estates worth more than $1 million, and the vast majority of the benefits accrue to the heirs of multi-million dollar estates.
  • 2012 Pension Tax Cuts: These tax cuts disproportionately benefit wealthy retirees with little or no benefit to low- and middle-income retirees. 58% of the benefits went to the richest 20% of households and 75% of the benefits went to the richest 30%. Seniors living only on Social Security retirement income got nothing.

Remember, Maine’s state and local tax system favored the wealthy even before these tax cuts were enacted. In 2009, the wealthiest Mainers paid 10 cents out of every dollar they earn in state and local taxes. Everyone else paid more. This situation was made worse by all of these tax cuts for the wealthy.

Now the bill for all those tax cuts is due. Here’s how Governor LePage plans to fill in a $430+ million dollar budget hole without making wealthy Mainers pay their fair share in taxes:

  1. Cut funding for K-12 schools and shirk the state’s voter-mandated responsibility to pay 55% of the bare-minimum cost of educating Maine kids. Right off the bat, the Governor was able to knock the $881 million budget gap down to about $630 million by choosing to “flat-fund” K-12 schools. In inflation-adjusted terms, that means school funding will be cut. But in addition to “flat-funding” schools, the Governor will “save” another $28 million over the biennium by forcing property tax payers to pay for half the cost of a teacher retirement program that municipalities and property tax payers had no hand or say in creating.
  2. Force higher property taxes with cuts to basic public services by slashing routine aid to all of Maine’s 490+ towns and cities. The Governor’s plan eliminates all state revenue sharing with towns and cities. This saves the state $283 million over the biennium and forces property tax payers to cover the loss, through some combination of property tax increases and lost municipal services. Since property taxes hit low- and middle-income homeowners and renters especially hard, this is a favor for Maine’s highest income households and a burden for everyone else. Even if towns take a balanced approach to covering this lost revenue from the state, local property tax payers will see their property tax bill increase by at least $80 per year, on average. Many middle class families will see much larger increases.
  3. Raise taxes on low-and middle-income Maine residents by eliminating over $80 million in property tax relief. Even in the unlikely event that towns manage to cover large losses in state aid without raising property taxes, middle class Mainers face a tax hike of at least $80 million over the next two years under the Governor’s plans to eliminate property tax relief through the Maine Residents Property Tax and Rent Refund Program (aka “Circuit Breaker”) and the Homestead Exemption. Out-of-state folks who own second homes in Maine will spared, but low-income and middle class homeowners and renters will not. The average property tax hike for homeowners who claim the homestead exemption will be about$120 per year. Up to 75,000 low- and middle-income Mainers—including seniors—who currently claim a partial property tax or rent refund under the circuit breaker program will see an average tax hike of about $479 per year.
  4. Use a stealth accounting trick to increase income taxes for the middle class. Governor LePage’s budget proposal also saves almost $9 million over the biennium by suspending the automatic inflation adjustments for Maine’s income tax brackets. This will increase taxes by about $49 for Maine residents who earn over $20,000 per year. Middle class families will pay for most of this tax increase.

Remember, the median Maine taxpayer got about $150 per year from the “largest tax cut in Maine history”. The poorest 1 out of every 2 Maine families got an average income tax cut of about $50 per year. Compare that to the slate of tax increases in the Governor’s proposed budget outlined above.

This plan to balance the budget on the backs of schools, communities, and low- and middle-income Maine taxpayers is unacceptable. Now is the time to tell our lawmakers.