May 28, 2018
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Myths, facts about the Maine tax reform package

By Albert A. DiMillo Jr., Special to the BDN

In an Aug. 8 column about the Maine “tax reform” law, LD 1495, Rep. John Piotti, D-Unity, states that “The amount of misinformation out there is staggering.” I agree; unfortunately most of the misinformation has come from the proponents of the law. As a lifelong Democrat, a retired corporate tax director and CPA with 30 years of tax experience, I was amazed at how deceptive my party has been in promoting this tax reform package and how little they understood the details. At all turns, they tried to suppress the facts that did not favor their position.

Rep. Piotti claims that it’s a myth that LD 1495 is a giveaway to the rich. The Maine Revenue Services prepared a report on the impact of the new law on Maine taxpayers. The report illustrated that a group of 4,456 taxpayers, the top 1 percent of Mainers earning over $333,388, will get $27.8 million of the total $53.9 million net tax cut. Accordingly, these 4,456 taxpayers will receive about 52 percent of the reported tax savings in 2010. In addition, because LD 1495 does not have the inflation adjustments until 2014 that were in the old Maine law, the tax savings in 2010 for 99.3 percent of Mainers will become a tax increase in 2013, assuming a conserva-tive inflation rate of 2.5 percent per year from 2011 to 2013. In 2013, this group of 4,456 taxpayers will have a tax decrease in total of $27 million, while the other 99.3 percent of Maine taxpayers will see a tax increase of more than $24 million.

Rep. Piotti notes that the tax reform bill was supported by newspapers, economists and business leaders. However, I have not yet met one supporter of the law that understood the details of the law. Even as a tax expert, it took over 200 hours of detailed analysis and calculations for me to fully understand this complex tax law and its impact on taxpayers and state revenue. I doubt any of the supporters ever did the detailed analysis that one should perform to make an informed decision on the merits of the law. I found that many supporters based their support on three false claims of the proponents. They claimed that the bill: would give $54 million in tax cuts to Mainers, with most Mainers getting $100 to $300 a year; would give substantial tax cuts to small business that would promote business expansion in Maine; and would be overall a revenue-neutral tax bill. The facts illustrate that none of these three claims is true.

The Maine Revenue Services report showed that 99.3 percent of Mainers will average only a $39 net tax cut in 2010 and that it becomes a tax increase of $37 each by 2013 assuming annual inflation of just 2.5 percent a year from 2011 to 2013. The proponents claim that LD 1495 provides incentives for owners of small businesses that file as individuals to locate in the state. The truth is 99 percent of Maine’s most successful small businesses will have on average a small tax increase under LD 1495 in 2010, so accordingly there is no real tax incentive to locate in Maine. The MRS report estimates that the 59,905 taxpayers with income from $114,104 to $333,388 will in total have a net tax increase of $14 each in 2010. Less than 1 percent of Maine’s most successful small businesses earn more than $333,388.

While the original version of the tax reform bill had inflation adjustments in years 2011-13, and might have kept the law revenue neutral, LD 1495 eliminated the inflation adjustments until 2014. The elimination of these adjustments results in creating more than $55 million in additional sales and income tax revenue over the old law.

I welcome an honest debate based on the facts, but based on the past actions of the proponents of LD 1495, that is unlikely to happen. Instead proponents like Rep. Piotti want to suppress the facts and ask voters not to sign a petition that will give them the time to educate themselves on this poorly designed tax law. Why are they so afraid of the truth? Start educating yourself by going to

Albert A. DiMillo, Jr. is a retired corporate tax director and CPA. He lives in South Portland.

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