A version of this article was originally published in The Daily Brief, our Maine politics newsletter. Sign up here for daily news and insight from politics editor Michael Shepherd.
Taxes have been points of emphasis for the two most recent governors. Former Gov. Paul LePage came into office after the Great Recession by pushing a massive income tax cut, while Gov. Janet Mills warned her party early on that she was not interested in tax hikes.
Both of them succeeded early on those fronts, with LePage stumbling on the topic later when he pushed a tax plan offsetting an income tax cut with a broadening and increase in the sales tax that fellow Republicans never really bought into. Because of all this history, the early LePage-era income tax code mostly stands as we enter the LePage-Mills 2022 race.
Under Mills, Mainers are taxed slightly more than they were under LePage, paying 12.4 percent of income in state and local taxes in 2022 compared with 11 percent in 2018, according to data from the conservative Tax Foundation. The stereotypes between Democrats and Republicans are not really the reason for this. The burden also rose nationally and in neighboring New Hampshire, a state with no income or sales taxes. Higher property tax values are among the reasons why burdens are growing, the foundation said.
Taxes have been on the Democratic incumbent’s mind this year, marked by continually rising surpluses that have allowed Mills to raise reserves to record levels while signing a $1.2 billion spending package. That budget was best known for $850 relief checks to most Mainers, but it will also raise the amount of retirement pensions exempt from income tax from $10,000 to $35,000 by 2025.
LePage wants to supercharge this idea in his first year, telling WMTW he would begin his plan to phase out Maine’s income tax by exempting all pension income from taxes. The liberal Maine Center for Economic Policy does not like Mills’ policy and would like LePage’s far less, with one analysis for the group saying 60 percent of the benefits under the current law will go to the top 20 percent of households. Under LePage’s policy, that would be 93 percent.
Property tax changes have also been stark. Mills has also fully funded K-12 education and revenue sharing to cities and towns while expanding the Homestead Expansion and other tax relief programs. But it was another change that she quietly acceded to that may change the landscape most.
That is a sweeping program allowing seniors to freeze their property tax payments each year even if they move to a bigger home in a more desirable locale, with the difference paid by the state to cities and towns. Even though it was a Republican measure that sailed through the Legislature on a bipartisan basis, it was criticized by the conservative Maine Policy Institute for adding a “potentially unmanageable expense” to the state budget.
If you are a Republican, you probably like much of what LePage did on this subject. Democrats can find plenty to like in Mills’ record as well. But the full tax landscape is more complicated than operatives would have you believe through Election Day.
Correction: An earlier version of this article wrongly described a recent change to income tax exemptions for pensions.