AUGUSTA, Maine — Gov. Janet Mills vetoed Friday a Republican lawmaker’s proposal to increase state income tax rates on wealthier residents in Maine while attempting to ease the tax burden for lower-income earners.
The bill from Rep. Micky Carmichael, R-Greenbush, was a rare example of a Republican bringing forward a measure to raise taxes on wealthier Mainers and passing it through the Democratic-controlled Legislature without the support of most party colleagues.
But Mills, a Democrat, vetoed Carmichael’s bill at the end of the 10-day window to either sign, veto or let it become law. She had renewed a pledge in 2022 to not raise taxes if reelected, though she signed a paid leave bill into law last year that includes a new payroll tax.
Mills wrote in Friday’s veto letter she took offense to the bill initially getting introduced as a vague “concept draft” that did not include its ultimate language during a public hearing. She also said that though “well-intentioned,” it does not deliver “meaningful tax relief” and could “jeopardize the stability of the state budget.”
“Over the past several years, we have substantially reduced, if not outright eliminated, the tax burden for low-income Mainers,” Mills wrote. “While I am always open to conversations about how we can continue to reduce the tax burden for Maine people, I do not believe this bill effectively achieves its aim.”
Beginning in 2025, Carmichael’s proposal would increase the income threshold for current tax brackets and create three new income tax brackets featuring higher rates for residents who make at least $144,500.
Individuals or married couples filing separately that earn $144,500 to $204,999 would pay $9,579 plus 7.55 percent of the excess over $144,500, under Carmichael’s measure. Those who make $205,000 to $499,999 would pay $14,165 and 7.15 percent of the excess, and residents earning at least $500,000 would pay $35,258 plus 8.45 percent of the excess.
Similar changes would come for married couples filing jointly, with higher rates particularly for those earning at least $1 million. They would owe $70,515 plus 8.45 percent of the excess over $1 million.
Mills said numerous expansions and increases related to deductions, exemptions and credits for low-income residents in recent years have given low-income Mainers “little or no tax liability,” adding that expanding the 5.8 percent bracket “provides no tax relief.”
Mills said Maine’s current top tax rate of 7.15 percent is the 10th highest nationally and that boosting it would “increase the state’s reliance” on less than 1 percent of taxpayers whose income is “disproportionately composed of highly volatile sources such as capital gains and business income.”
All Senate Republicans and most House Republicans opposed Carmichael’s measure earlier in April, but it received support from all Democrats and several GOP representatives from rural areas — Randall Hall of Wilton, Rick Mason of Lisbon, Abden Simmons of Waldoboro, Caldwell Jackson of Oxford, Dan Costain of Plymouth, Dean Cray of Palmyra and Roger Albert of Madawaska — to pass the lower chamber 88-57.
At least two-thirds of lawmakers need to agree to override the governor’s veto in order to make the bill become law.
In a floor speech, Carmichael, who was elected to the House in 2020 and represents numerous small towns in Penobscot and Washington counties, said his constituents and other Mainers have struggled with inflation since the pandemic.
Carmichael highlighted a “segment of hardworking Maine families that have been continually left behind economically.”
A single person in Maine currently pays a 5.8 percent tax on income up to $24,500. Carmichael’s bill would expand the income thresholds for three brackets that he argued would result in lower taxes for low- and middle-income earners.
For example, the bottom bracket changes to include a single person earning up to $41,600 (who would still pay 5.8 percent), the middle bracket would go up to $85,000 (plus 6.75 percent of the excess) and the third would go up to $144,500 (plus 7.15 percent).
Carmichael’s plan was projected to increase state revenue by $570,000 next fiscal year. Raising the top rate to 8.45 percent came after then-Republican Gov. Paul LePage and a GOP-controlled Legislature lowered the rate in 2013 from 8.5 percent to 7.15 percent. LePage also attempted to eliminate Maine’s income tax altogether.
Maine’s top rate under Carmichael’s bill would stay lower than the 9 percent rate in neighboring Massachusetts and higher than the flat 4 percent tax on interest and dividends income in New Hampshire.
Garrett Martin, president and CEO of the liberal Maine Center for Economic Policy, said Mills “missed a valuable opportunity to add fairness to Maine’s tax code.”
Martin said Carmichael’s proposal “wasn’t a perfect tax bill — most of its benefits targeted upper middle-class households and no benefits were available for Mainers with the lowest incomes — but asking the wealthy to pay more was a step in the right direction.”
Mills also vetoed Friday a bill from Sen. Mike Tipping, D-Orono, to require state entities to enter into an “employee and employer harmony agreement” with labor organizations seeking to work on clean energy development project sites, with the governor saying it contained “ambiguous language.”
The AFL-CIO criticized Mills for opposing agreements it said are encouraged by President Joe Biden’s administration and give workers “a free and fair chance to join a union for any operations and maintenance, maritime or manufacturing work done on state leased lands including an offshore wind port.”
