AUGUSTA, Maine — A budget deal closed by Gov. Janet Mills made Maine a notable example among the growing number of Democratic-led states to implement a millionaire tax.
Maine is a second-home getaway for many millionaires but has relatively few of its own, especially when compared to California, New York and Massachusetts, the deep-blue states that have enacted similar taxes. The Wall Street Journal noted this week how the idea is spreading to states that are not as wealthy.
Mills had opposed such a tax for years until accepting this one as part of a budget that also included her $300 relief checks. It was a victory for progressive groups here and a loss for business groups who criticize it for hitting businesses and other types of filers.
Here’s a look at the new law and a deeper look at who exactly will pay.
Maine’s new tax is expected to bring in $74 million annually.
The tax is simple in its design. Starting next year, Maine will put a 2% tax on income over $1 million for single filers and $1.5 million for joint filers. It’s expected to generate $74 million per year and hit 2,600 tax filers, according to state estimates.
This was identical to a bill from Rep. Cheryl Golek, D-Harpswell, that was opposed by the Mills administration and the Maine State Chamber of Commerce and backed by progressive groups including the Maine Center for Economic Policy when it was rolled out last year.
Who pays? That can change year to year.
How many millionaires are in Maine? The number changes all the time. In 2022, 1,900 Maine filers reported $1 million in income, according to the latest IRS data. In 2017, only 980 were above that mark.
Roughly one-third of the taxed income in 2022 was from capital gains, an income source that changes sharply from year to year and can include stock, business or real estate sales. Another third comes from business income that passes through to the owner’s tax return. Wage income was only 22% of this total, while miscellaneous sources made up the rest.
There’s a gulf between supporters and opponents.
The liberal Institute on Taxation and Economic Policy hailed the bill as a win for tax fairness and noted the items funded in other parts of the bill, even though the millionaire tax was only a fraction of the overall money in the budget deal.
On the other side, the conservative Tax Foundation noted that 70% of filers above $1 million had pass-through income on their returns, calling it “a tax on small business ownership.” But the IRS data shows the vast majority of these filers report a mix of income sources as well, so it’s typically not just one type of money that puts someone over the threshold.
This debate will continue in the State House no matter who wins the open race to succeed Mills. All of the Democratic candidates support the millionaire tax. One of them, Senate President Troy Jackson, wants to double it. Republican Jonathan Bush made a video criticizing Jackson, which led the Democrat to film a response outside Bush’s Cape Elizabeth home.