AUGUSTA, Maine — Maine is expected to see $294 million more in tax revenue through mid-2025 than previously anticipated, a disclosure that led Republicans to double a demand for tax cuts that Democrats rejected in a budget battle last month.
The new estimates from the state’s Revenue Forecasting Committee remained relatively rosy mostly due to income tax collections coming in over budget, buoyed by $52 million from a $1.35 billion Mega Millions jackpot whose winner bought their ticket at a Lebanon store in January.
Forecasters were more cautious about later years in a sign that early-pandemic surpluses fueled by a wave of federal COVID-19 aid are firmly in the past. The new estimates will still give lawmakers up to $900 million to argue over in a second round of talks on state spending after Democrats bypassed Republicans to pass a $9.9 billion two-year budget in March.
New initiatives favored by Gov. Janet Mills were set aside in that document, with Democrats vowing to take them up later in the spring. They include $400 million in transportation funding that aims to draw down $1 billion in federal funding, plus $121 million in health funding, $55 million for colleges and universities and $30 million for rental housing.
“I look forward to working with the Legislature in the coming weeks on these issues,” the Democratic governor said in a statement.
It was the second time in two years that Democrats used their majorities instead of the normal consensus process to push through a two-year budget. It enraged Republicans who said they were willing to deal on state spending. In a last-ditch effort to bring Democrats to the table, they put forward language that would have committed to $200 million in income tax cuts.
In a Friday statement, House Minority Leader Billy Bob Faulkingham, R-Winter Harbor, and Senate Minority Leader Trey Stewart, R-Presque Isle, doubled that call to $400 million, implicitly criticizing a Democratic focus on property tax relief efforts and new programs.
“Republicans are calling on Democrats to commit to working with us to end the practice of over-collecting and over-taxing our citizens and then sending part of it back to some,” they said. “This practice of picking winners and losers must end.”
The final proposal from Republicans did not specify a particular tax cut, but they had been lobbying to reduce rates for Maine’s lowest income tax bracket from 5.8 percent to 4.5 percent. The liberal Maine Center for Economic Policy said doing so would provide larger benefits to those making over $150,000 because of deductions that reduce lower-income tax burdens.
Mills’ office said the governor would release a change to her budget package in the next two weeks that makes use of the new revenue. It is not clear whether Democrats will let Republicans in on the next budget deal. If the majority party passes a budget alone, it would take three months to go into effect. A bipartisan deal could enact it immediately.
But the governor appeared to be trying to head off aggressive use of the surplus revenue given future economic uncertainty, with her statement saying she would use some as a “down payment” on a plan announced Thursday to overhaul and expand a group of business tax cuts.