It’s been three months since Gov. Paul LePage came out with his two-year budget proposal and its cornerstone that has driven debate in Augusta all winter: His plan to overhaul Maine’s tax system with significant income tax cuts offset in part by higher, more broadly applied sales taxes.
Now, Democrats have stepped into the fray with a tax plan of their own as a June 30 deadline for passing a budget approaches.
Democrats have taken the cue from the governor and developed their own tax plan with different objectives, but with a good deal of foundational tax changes in common with the LePage plan.
While the LePage plan is focused squarely on reducing income taxes, Democrats have chosen property taxes as their target.
While Democrats haven’t redone the spending side of the budget in the tax plan document they released Thursday, they have included one spending choice: $20 million in additional funding for Maine’s public schools. In his budget proposal, by contrast, LePage has kept school aid constant. Yet, funding for schools makes up the largest portion of property tax bills in most Maine communities, and school funding increases in the past have managed to keep property taxes in check.
Even with a focus on property tax relief, Democrats have chosen to propose a revamped income tax with two new tax brackets and a higher threshold before the top marginal tax rate applies. Under the Democrats’ plan, the highest marginal rate — 7.95 percent — kicks in at $150,000 of taxable income rather than the current level of $20,900.
On the deduction side, Democrats keep in place LePage’s elimination of itemized deductions but offer a higher standard deduction — $9,000 vs. $6,200 — that starts to phase out for those with taxable incomes of $50,000-$75,000.
As for the sales tax, Democrats agree with LePage on broadening it to a number of services that have never been taxed before, but they would keep the current rate, 5.5 percent, in place.
One contrast with LePage that Democrats are quick to draw has to do with revenue sharing. While LePage plans to eliminate it starting July 1, 2016, Democrats would raise the level to $80 million annually from its current $60 million mark. That level would still fall short of the 5 percent of sales and income tax revenues towns and cities are supposed to receive under a 1970s law.
Here’s the full document, with notes included.
Matthew Stone is opinion page editor for the Bangor Daily News.