Senate approves amended bill to lower Maine’s top income tax rate

Posted March 30, 2012, at 2:29 p.m.

AUGUSTA, Maine — The Maine Senate on Friday kept alive a controversial proposal that would use surplus state revenue to lower state income tax rates.

In a slightly bipartisan 21-11 vote, the Senate passed an amendment that would temper the impact of LD 849, a Republican-backed measure that has become a point of friction for the Legislature. Two Democrats voted for the bill, along with all Senate Republicans.

The newly amended bill goes back to the House, which voted down the bill earlier this week.

LD 849 bill is designed to ratchet down Maine’s top income tax rate gradually to 4 percent using excess revenue. Supporters said it’s a great way to help struggling Mainers by using extra money for tax relief rather than to expand new programs or invest.

Critics have argued that the bill cripples the ability of future Legislatures to craft budgets because it gave no accounting for that lost revenue. Many likened it to Taxpayer Bill of Rights efforts that have been rejected multiple times by Maine voters.

The original proposal would have used 40 percent of one-time surpluses that normally go into the state’s “Rainy Day” fund to make income tax cuts.

The amendment that passed would set aside 20 percent in the tax relief fund, a move intended to convince enough House Republicans to support it.

During Tuesday’s initial House vote, 11 Republicans joined all but one House Democrat to reject the bill, but some said they would consider supporting it if it was amended further.

Sen. Chris Johnson, D-Somerville, said Friday that the amendment helps but he still couldn’t support the bill because it provides tax breaks to the wealthy.

“People are struggling and we’re saying we would like to give higher-income people a tax break,” he said.

Sen. Jonathan Courtney, R-Springvale, said Democrats are playing “class warfare” with the tax bill.

“We can play tax warfare … but I’m not afraid to cut the top tax rate. It’s good policy,” he said.

Sen. Dick Woodbury, U-Yarmouth, who serves on the Taxation Committee and is an economist, said he, too, wants to decrease the income tax, but said those lost revenues need to be made up somewhere else.

“We’re simply aggravating a future gap that we’ve already made large,” he said “I’m all for re-weighting the system.”

The House likely will take up the amended bill early next week.

Follow BDN reporter Eric Russell on Twitter at @BDNPolitics.

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