Hearing focuses on LePage’s proposed tax changes

Posted March 21, 2012, at 7:50 p.m.
Gov. Paul LePage
Pat Wellenbach | AP
Gov. Paul LePage

AUGUSTA, Maine — A joint public hearing of the Legislature’s Taxation and Appropriations committees Wednesday on Gov. Paul LePage’s tax proposals sparked concern over how to pay for the changes and what their actual effect would be on certain groups of taxpayers.

Albert Dimillo, a retired corporate tax director and certified public accountant from Portland, said he opposed all of the tax changes, but focused his testimony on the proposal that would increase income tax exemptions for retirement income starting in 2014. The proposal would raise the income limit to $10,000 in 2014 and reach a total of $35,000 in 2019.

“The proposed tax changes are not good tax policy,” DiMillo said. “Most retirees in Maine do not pay an excessive income tax; the vast majority of Maine retirees pay much more in property tax than income tax.”

He said tax policy needs to be given enough time to be considered properly, including time for lawmakers to weigh unintended consequences. He said tax changes do not belong in a supplemental budget.

But John Wakefield of the 15,000-member Maine Association of Retirees, a group of people who get pensions from the Maine Public Retirement System, said any tax relief will be welcomed by its members. Wakefield, a former staff director of the Appropriations Committee, was asked if he had any recommendations on how to pay the cost of the tax break, estimated at more than $93 million a year.

“No disrespect to your question,” he said, “but last session they cut the COLA [cost of living allowance] cap and suspended the COLA for three years. According to the Office of Fiscal and Program Review, that was $344 million in general fund money; I think most of our members think they have already given.”

The proposal also is popular with state workers, said Chris Quint, executive director of the Maine State Employees Association. But he said tax policy issues should be considered carefully and not as part of a supplemental budget.

“We would urge you to put this off to the next biennial budget,” he said. “There is a concern about where is the money coming from to pay for this in the future.”

Garrett Martin, executive director of the Maine Center for Economic Policy, a progressive think tank, said the proposal is “fiscally irresponsible” and should be rejected. He said it is unpaid for and could pose serious problems for future legislatures and governors.

“If we ask ourselves who are the older Mainers most in need of tax relief, more than likely it is not someone with a pension, it is someone who lacks the retirement security to stop working,” he said.

Several people testified in support of extending the sales tax exemptions that agricultural and fishery interests now have to horticulture and woods businesses. Jon Olson of the Maine Farm Bureau said the changes make sense.

“The horticultural industry is the only agriculture industry that does not have sales tax exemptions for needed equipment,” he said. “We have had six bills in past sessions to do this and they all have been passed and then died on the Appropriations Committee table. We hope it passes this year.”

The tax proposals also include a provision that would exempt income of a member of the National Guard or active duty military while serving on active duty outside of Maine. For example, the measure would mean National Guard members sent by the governor to help repair hurricane damage in another state would not pay Maine income tax on that portion of their pay.

The proposal also called for a tax break for sales and rentals of equipment used for respiratory ventilation, to kick in during the remainder of the current budget cycle.

The tax sections will be considered by the committee as they review the entire supplemental budget over the next few weeks.

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