AUGUSTA, Maine — After more than a month of political divides over taxes, a key Democrat and a Republican leader said the parties may be able to find consensus on ways to adjust rates and help low-income Mainers.
Those statements were somewhat of a breakthrough after a contentious budget process in March that saw Democrats push through a $9.9 billion spending plan in March over Republican opposition and setting aside the minority party’s demand for a $200 million income tax cut.
Continued surpluses that came out of a new forecast last week led Republicans to double that request. Democrats have stood against some of their most ambitious plans and a push from advocates for a large child tax credit looms, but Rep. Joe Perry, D-Bangor, the co-chair of the Legislature’s tax committee, said a focus on lower tax brackets could yield a deal.
“I’m confident we can work together,” he said.
The key Republican tax proposal from Rep. Jack Ducharme of Madison would lower the rate for Maine’s lowest income tax bracket from 5.8 percent to 4.5 percent, citing the record surpluses fueled by federal aid earlier in the COVID-19 pandemic.
Forecasters projected another $294 million in higher-than-expected revenue through mid-2025 last week, giving lawmakers up to $900 million more to allocate this year. After most Republicans agreed to deal with Democrats to issue a second round of relief checks early this year, Republicans have pushed for permanent changes to the income tax code.
“It is clear that something must be done to slow the overcollection of taxes from hardworking Mainers,” Ducharme told the tax panel on Wednesday.
Going back to the era of former Gov. Paul LePage, Republicans have been focused on income tax cuts. Democrats have favored programs aiming to reduce property taxes. A child tax credit bill from House Majority Leader Maureen Terry, D-Gorham, could figure into this year’s mix. It would give parents $350 in 2023 for each dependent and index it going forward.
The liberal Maine Center for Economic Policy is arguing for that proposal after releasing data in late March showing Ducharme’s proposal would actually provide the greatest benefit to Mainers earning over $150,000 due to the state’s large standard deduction and personal exemptions that reduce low-income tax burdens.
Ducharme countered on Wednesday by saying it was “nearly impossible to give tax relief only to those in the lower-income strata” and his bill would still benefit over 450,000 taxpayers at a cost of just over $200 million. Republicans have not fleshed out the details of their larger request.
It met immediate resistance from the administration of Gov. Janet Mills, which sent Chase Hewitt, an attorney with Maine Revenue Services’ tax policy office, to testify against Ducharme’s measure and other Republican ones that he said do not consider “the impact of those cuts on the services offered by the state of Maine and the people who rely on those services.”
But Perry said he sees potential for discussions around proposals to adjust tax brackets, even if the two sides do not agree exactly on how to do so. He said he is “encouraged” by Republicans focused on helping lower-income residents versus “only the top-end people,” although he said bills to eliminate the income and personal property taxes are “wasting everyone’s time.”
Assistant House Minority Leader Amy Arata, R-New Gloucester, told the tax panel on Wednesday that she was optimistic the two parties could reach an agreement on the ideal rates for Mainers. That will only happen if Democrats allow Republicans to put their stamp on a budget deal.
“So much is done at the leadership level,” Perry said. “Anything we do will likely occur in the last days of the legislative session.”