This bill would boost the state’s economy and reduce childhood poverty by cutting taxes for up to one hundred thousand working Maine families.
LD 455 is a targeted tax cut for those who most deserve and need it: families who work and have kids but don’t make much money. These families paid more state and local taxes per dollar of income than the wealthiest families in Maine in 2009, the latest year for which data are available. In many cases, state and local taxes accounted for 17 cents of every dollar they earned, compared to 10 cents for every dollar brought in by the top 1% of income earners in Maine. Meanwhile, nearly 1 in 4 children under the age of five live in poverty.
Without LD 455, taxes are going up for working Maine families who can least afford it. In 2011 and 2012, the 125th Legislature passed a variety of tax cuts, but the benefits for low- and middle-income families were scant. Just looking at income taxes alone, the average tax cut for 135,000 low-income families is about $12 in 2013. The average tax cut for the poorest half of all Maine families is about $46. These income tax cuts don’t stand a chance against rising property taxes. Governor LePage’s plan to eliminate homestead property tax exemptions will increase property taxes for the average non-elderly homesteader by $120 per year. The elimination of $35 million in circuit breaker property tax relief for low- and middle-income non-elderly Mainers will increase property taxes for up to 75,000 low- and middle-income households by nearly $500 on average. LD 455 would provide real tax relief to those who need it most: an average tax cut of more than $900 for 100,000 low- and middle-income Maine families.
LD 455 would also boost Maine’s economy by helping to address what small business owners say is their number one problem in the wake of the worst recession since the Great Depression: poor sales. Families eligible for the earned income credit have what economists call a “higher marginal propensity to consume,” which basically means they are more likely to spend their tax cut on home repairs, on car repairs so they can continue getting to work, on other necessities, and in some cases on additional education and training to boost their earning potential.
Low-income families should not be forced to pay higher tax rates than everyone else. Taxes should not be going up for working families with kids living in poverty. LD 455 would provide a substantial tax cut to working families in Maine, lift many families with children out of poverty, and help Maine businesses suffering from poor sales. For these reasons, the Maine Center for Economic Policy strongly supports LD 455.
Joel Johnson, MECEP Policy Analyst, testifying before the Joint Committee on Taxation in support of LD 455.