Baldacci signs tax reform bill into law

Baldacci signs tax reform bill into law


By Kevin Miller
BDN Staff
AP PHOTO BY JOEL PAGE
Maine Gov. John Baldacci, joined by legislators, speaks before a signing ceremony for bill that overhauls the state's tax code, Friday, June 12, 2009 in Augusta, Maine. The new law lowers Maine's top income tax rate, and broadens the sales tax to new goods and services.

AUGUSTA, Maine — Gov. John Baldacci signed into law on Friday a tax restructuring bill that aims to stabilize Maine’s revenue flow by collecting more taxes from visitors to the state and less from residents.

Several dozen Democrats packed into the governor’s office and then cheered loudly after Baldacci put his signature on a bill that lowers Maine’s top income tax rate from 8.5 percent to 6.5 percent for those earning less than $250,000 a year.

The bill seeks to offset those revenue losses by applying the sales tax to more goods and services while increasing the state’s meals and lodging tax from 7 percent to 8.5 percent. While bill supporters acknowledge Mainers will end up paying more in sales taxes and at restaurants or hotels, they predict that nearly 90 percent of residents will end up paying less in total taxes for the year because of the reduction to the income tax.

Supporters put the total savings for Maine taxpayers at around $55 million a year, or roughly $160 a person for the majority who will see a tax break. Opponents of the bill, which passed largely along party lines, questioned those savings.

Baldacci noted that Maine is lowering the income tax rate at a time when many other states are considering the opposite in order to weather the current recession.

“This has been an enormous undertaking and one which required many people to work very hard over a long period of time,” the Democratic governor said during the ceremony.

The bill signed into law on Friday is somewhat different from the measure passed by the Legislature last week after heated debate. Baldacci removed sales taxes on ski resorts, golf courses, bowling alleys and some other recreational activities. He also eliminated an increase in the real estate transfer tax for homes worth more than $500,000 but added a refundable earned income credit for low-income residents.

The governor’s bill also contains a smaller income tax reduction — 6.85 percent versus 6.5 percent — for Mainers earning more than $250,000 a year.

Rep. John Piotti, a Unity Democrat who was lead sponsor of the original bill, said afterward he was comfortable with the changes made in the governor’s bill.

“I know there are people who question whether this is good for Maine, but the people who have looked at this closely over many, many years, and the economists who have studied it, really believe this is going to provide a boost to our economy and is to going to be a benefit to the state of Maine,” said Piotti, the House majority leader.

Sen. Joseph Perry, the Bangor Democrat who led debate on the bill in the Senate, echoed comments that the legislation should only be a first step toward wider tax reform, especially in the area of income taxes.

“We’re not done,” said Perry, co-chairman of the Taxation Committee. “That [income tax] number is going to come down more over the next few years. I’d like to see it get down to 4.5 percent.”

During debate on the bill, the mostly Republican opposition questioned whether the measure will truly result in a tax break for most Maine residents. They warned that the most vulnerable, such as the poor and elderly, could end up paying more because of the broadened sales tax and worried that Maine’s hospitality and tourism industry — the state’s largest economic engine — could suffer due to the higher meals and lodging taxes.

The income tax reduction takes effect on Jan. 1.

kmiller@bangordailynews.net

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Comments
31 comments on this item

Who do they think is going to go out and eat, get their car fixed in December and January? Thank god the tourists come all year long.... NOT. Come on people, when are we going to get it. They are out of control and now they add another twist on bills that increase your taxes. They vote down the part about allowing it to go to referendum. Why do you think they do that? Many of the bills they passed will eventually hit your wallet and they were done under the radar. So be prepared to work 3 jobs to pay for the new taxes your elected officials passed along this year. Are you fed up yet?????

BOHICA

You people in Bangor must be soooooooooo proud of your boy.

Yes, I am wondering if these leaders asked the "PEOPLE" What they wanted? Was this another agenda to get their name in the paper? Maine people have got to start questioning what this administration is doing??

The legislature's debate about gay marriage, which will bring about $8 million into Maine the first year if it's not voted down in a referendum, was closely scrutinized by the media but the debate leading up to the vote on the tax reform bill was barely covered. Where were the petitions? Where were the demonstrations? Where were the editorials and impassioned letters to the editor? Is there more interest in whether a couple of consenting adults do or don't have a piece of legal paper in the dresser drawer than there is in how much money is extracted from the wallets of Maine residents?

Let's think about this for a minute...... Our Democrats in Augusta are the party of the common man, the old and the poor . So, they reduce the income tax rate for people making over $250,000 a year . Then they increase the tax rate on restaurant meals and put a sales tax on services which were never taxed before. From what I see when I go to a restaurant, going out to eat is a favorite activity of old retired folks on fixed incomes. And everyone knows that sales taxes mostly hurt people with fixed and low incomes . So can someone tell me how reducing income taxes for the rich and increasing consumption taxes for everyone is such a great thing ? When are the people of Maine going to put an end to the lies and hypocrisy in Augusta ?

The tax table below will show in detail the Maine state income tax rates by income tax bracket(s). There are 4 income tax brackets for Maine.

If your income range is between $0 and $4,850, your tax rate on every dollar of income earned is 2%.

If your income range is between $4,851 and $9,700, your tax rate on every dollar of income earned is 4.5%.

If your income range is between $9,701 and $19,450, your tax rate on every dollar of income earned is 7%.

If your income range is $19,451 and over, your tax rate on every dollar of income earned is 8.5%.

So this tax break is for everyone making $19,451 and over. I believe this tax break would be for a large portion of the tax base in Maine, not just for people making over $250,000.

source: http://swz.salary.com/salarywizard/layouthtmls/swzl_statetaxrate_ME.html

If Joe Perry is behind something you can bet your bippy that it is one screwed up idea. He ought to get a friggin blue ribbon for this one. I guess I'll be eating out less.

--No Worries: Pelosi and B. Hussien O. are going to use slush funds --I mean TARP money to bail out restaurants.

It's all good! --Jus ask Biden.

PEOPLE'S VETO!!!!!!!!

"So, they reduce the income tax rate for people making over $250,000 a year ."

That is a half truth perpetuated by people who want class warfare.

The income tax rate has been reduced for most people holding full time jobs, which, of course, includes those who earn over $250,000.

Those without employment did not get a reduction because their rate is already zero.

I agree with PaulVo!! WE the people who work will be paying more in the end!! He has no business sense.... He ran his family business into the ground after his mother passed... He is doing the smae thing to this state! The DEMS will have NOBODY to blame but THHEMSELVES!

"The tax table below will show in detail the Maine state income tax rates by income tax bracket(s). There are 4 income tax brackets for Maine.

If your income range is between $0 and $4,850, your tax rate on every dollar of income earned is 2%.

If your income range is between $4,851 and $9,700, your tax rate on every dollar of income earned is 4.5%.

If your income range is between $9,701 and $19,450, your tax rate on every dollar of income earned is 7%.

If your income range is $19,451 and over, your tax rate on every dollar of income earned is 8.5%.'"

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Not anymore mAineAc. All those bracket were changed to 6.5%. All standard & itemized deductions and exemptions were eliminated and replaced with tax credits that are phased out at low income. Everyone who uses the standard deduction presently will see a tax cut. People who pay no tax will receive a check. Many people who itemize will see a tax increase. By the way the statement used with your income ranges is wrong. For example only the income between $4,851 and $9,700 is taxed at 4.5%. All your income below that is taxed at 2%. Only income OVER $19451 is taxed at 8.5%.

I don't think they did enough on reducing the tax rate. I think that for the lowest tax range it should be 0 not 2% of their income. This group would include the very poor in this state. I also think they should have reduced the other three tax brackets in this state by another 2% not just reducing the rate for the people making over $19,450. I don't mind taxing a use tax. That does spread it out better and does not penalize for saving. But we need to bring more jobs into this state and reducing the income tax for the biggest portion of workers in this state is a good first step.

"So, they reduce the income tax rate for people making over $250,000 a year ."

The reference to $250,000 referred to one of the changes make to the bill passed earlier this week. They increased the tax on income over $250,000 to 6.85%. In the earlier bill they reduced the rate from 8.5% to 6.5%. The new come with an elimination of standard & itemized deductions and exemptions.

"I think that for the lowest tax range it should be 0 not 2% of their income. "

I think that every single person should be treated equally in regards to their contributions and every single dollar earned should be taxed at 5% whether you earn $2 a year or $2,000,000 a year.

Under that system, if you don't earn much, you don't pay much. If you earn a lot, you pay a lot. But everyone would have "skin in the game", so to speak, in regards to the spending of OUR tax dollars.

mAineAc....thanks for clearing up the income tax rate thing. Just one quick question....Shouldn't the table say ..... if your TAXABLE income range is......and ...your tax rate on every dollar of TAXABLE income earned is.....? For many people, such as the elderly on Social Security, the difference between total earned and total net taxable income is quite large . In my case, my total income would put me in the 8.5% bracket but my TAXABLE income puts me in the 2% bracket. So, the income tax rate reduction will have very little effect on the large number of retirees and low income people who make up such a large percentage of Maine's population. However, the increases in "consumption" taxes will effect everyone.

"Not anymore mAineAc. All those bracket were changed to 6.5%."

Are you sure? So someone with taxable income of $3,000 will now pay 6.5% income tax?

All I have seen reported is that the TOP rate came down from 8.5% to 6.5%

I haven't seen that the bottom rate went from 2% up to 6.5%. Where did that info come from?

SiddFinch..... I'm with gw2kpro, where did you get all the info about new tax rates, deductions, etc ?

Sure helps me make up my mind about my upcoming vacation. Maine or New Hampshire??? Guess who just won?

It's about time! Most states in NE have 10% taxes of food and lodging. Canada is even higher. ME income tax was atrociously high. However, it's a darn shame they did this only after I retired.

You can almost hear the screech of brakes at the border of those not coming into the state because it will be cheaper just to go somewhere else....

""Not anymore mAineAc. All those bracket were changed to 6.5%."

Are you sure? So someone with taxable income of $3,000 will now pay 6.5% income tax?

All I have seen reported is that the TOP rate came down from 8.5% to 6.5%

I haven't seen that the bottom rate went from 2% up to 6.5%. Where did that info come from?"

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Directly from the bills LD1088 &LD1495 and Title 36 of the Maine tax law.The Maine papers have parroted what the sponsors have said and have not done their job informing the public what these bills do. Go to Section 5111 (this section use to contain the 4 tax brackets ) to quote: A tax is imposed for each taxable year beginning on or after January 1, 2010 on the Maine taxable income of every resident individual of this State at the rate of 6.5%.

They impose this rate and eliminate standard & itemized deductions and exemptions. They give your tax credits (see section 5218 of the bills). The lower incomes will still receive a tax cut but no way near the 2% of income they imply. Those tax credits are phased out based on income. Many middle class taxpayers who itemize deductions will see an increase in income tax. An elderly couple with one of them in the nursing home could see large increase in income taxes because their high medical deductions are lost. Many middle class homeowners will see an increase income tax due to their mortgage and property tax deductions. Most of the wealthy will see large income tax cuts. The Democrats have passed a bill that increases the income tax on 30,000 to 45,000 middle class taxpayer who itemize while giving everyone else an income tax cut. Most offensive to me is those with high medical expenses expected to pay higher income tax. The Governor and the sponsors of the bill are aware that they are increasing tax on the sick while giving tax cuts to the wealthy and did it anyway. Where were the media? The KJ and Morning Sentinal editiorial staff were aware that they were taxing the sick and voiced support for the bill. It's like we are living in an opposite world. The Democrats proposing to increase tax on the middle class and give tax cuts to the wealthy while the Republicans oppose it.

Sorry, you and the smug faces looking over your shoulder jockeying to get their face in the picture with you, need to be run out of this state with torches.

We have no idea how well this will be for us, yet you know better because you have studieded it for years......Did you and your ilk read the thing or are you following the lead of your national reps?

I would not visit this State if you raised the hotel and resturant taxes. Just what makes this place so appealing these days? Enlighten me???? Well I am waiting....... Yup your lost and you have lost touch with the working man. I work for a living, you do not suppoort me in anyway, so Never and I mean Never say you are a the party of this man.

I pray daily that this country and the real Americans wake up.

'safedman'-----AMEN!

All the more reason not to buy or do anything in Maine!

So basically what they're doing is tying the future rate of increase in state revenue to the rate of inflation rather than the rate of income growth.

Since they're doing nothing to increase income through growth of high wage jobs, and driving out the existing high wage jobs, a good prognosticator would predict that the state's confiscation from wage earners via the income tax will likely be stagnant ot trend downward anyway.

On the other hand, out of control spending and borrowing at all levels of government is very likely to fuel huge inflation. Prices of goods and services go up, sales and use taxes go up.

Basically they're admitting that they're failures at economics, but they want to insure continued growth in government to benefit their power and the political money train for their donors and themselves.

Wow they did screw us over big time. This is from the summary of LD 1088 They did change this basically to a flat tax that will not give very much of a break to us. They say that this is supposed to be a business incentive. The only incentive I see after reading that is to tax lawyers in the state.

"Part A makes fundamental changes to simplify and reduce the burden of the State's income tax and create an income tax that is intended to be more beneficial to investment and economic growth in the State. The current structure of 4 tax brackets, personal exemptions and deductions is replaced by a flat rate of 6.5% on all taxable income. The progressivity of the current income tax is maintained through a household credit that alleviates the impact of the 6.5% rate on low-income and middle-income households. The alternative minimum tax on individuals is abolished."

Our weak Govenor Has screwed us again. He say no new taxes. But he lied again. Sales taxes going up, income taxes will go back up in a year or so, and then we have the new tax on Health insurance to keep the failure Dirigo Health going longer, you know now we have to pay taxes on our medical bills. So we can pay for the little over 9000 people who have Dirigo Health. At the beginning of 2009 it was to have 130,000 people inrolled and be paying for itself. Maine Baldacci has screwed us again!!! 2010 can't come quick enough!!!

Savings are about $160 a year per person, so that is what a little over $13 a month? Yeah that extra $13 a month will go towards the stupid expanded lodging tax and all the other crap they want to tax. I don't see any good in this. The people will loose in that case...which is typical of this state.

That $160 will be burnt in gas and fuel oil before August!

That makes it official; most Mainers will now have to pay more in taxes! What will it take for the Maine democrats to realize we need MAJOR cuts in state spending?

If/When you're ready to say "Enough is enough", I hope you'll help solve this problem...there are several solutions, www.MaineTaxpayers.com

We The People deserve better than what we're currently getting from our so-called leadership in both Augusta, Maine and Washington, DC.

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