Estimates of how Gov. Paul LePage’s tax reforms would affect households at all different income levels show the steepest cuts would go to Maine’s richest and poorest residents.
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The breakdown comes from a Maine Revenue Services analysis that models the contours of the LePage proposal against current tax law for the years 2016 and 2019.
To help cut through the fairly dense document, we took notes for you (and made some notes of our own), focusing mostly on the analysis of what would change under the plan in 2016. Scroll through the document to read some explanatory notes that break down the analysis.
View the document in a new, full window here.
The MRS analysis looks at how the tax plan affects Maine residents at various income levels, assessing changes in how much they would pay in income, sales and property tax if LePage’s tax plan takes effect and if it doesn’t. The document also shows what share of each revenue source each income group contributes to state coffers. In the end, Maine Revenue Services makes the case that the plan actually makes Maine’s tax system slightly more progressive.
The plan relies on boosting the sales tax expenses of people in every income bracket by at least 20 percent, though the estimates have some wiggle room. The LePage plan would tax a whole host of services and things that are not currently taxed, which makes those estimates more challenging than estimating revenue from things that are currently taxed.
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Critics argue the agency’s modeling overemphasizes how the plan helps low-income Mainers and excludes detail on secondary impacts of the plan. For instance, state income tax can be deducted from federal taxes, so a state income tax cut is partially offset by the fact that some Maine taxpayers — those who itemize their federal deductions — would claim a smaller state income tax deduction when filing with the IRS.
The analysis also assumes all low-income people who qualify for tax credits to offset the sales tax hike under the plan apply for them and claim them.
The analysis shows a decline in tax liability for people at all income levels, but the taxes being raised are those that take the least from the state’s richest residents. The “effective tax rates,” measuring what percentage of a person’s income is consumed by a tax, is and would remain the lowest for the top 1 percent of earners when it comes to property and sales tax.
Through all of the tax shifting in the plan, the MRS analysis makes the case that the distribution of tax obligations across all income levels would remain largely the same.
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