Maine taxpayers would have had to pay $1.4 billion more in income, payroll and estate taxes, according to calculations by Mike Allen’s, Maine’s associate commissioner for tax policy, if the U.S. Senate and House had not passed a measure to end the “fiscal cliff” debate Tuesday.
Approximately $355 million of that sum would have resulted from the end of the payroll tax holiday, Allen said. Since 2011, the payroll tax holiday has lowered the Social Security payroll tax deducted from paychecks to 4.2 percent of income from 6.2 percent.
The Congressional Budget Office was projecting the impact of going over the fiscal cliff would have been significant enough to push the U.S. economy back into recession.
“Certainly, if the U.S. economy goes into recession, I’m sure Maine would be pushed back into recession as well,” he said Monday before a deal came through. “$1.4 billion for the Maine economy: That’s a significant impact on Maine households.”
That would have meant a $3,000 annual impact for the typical Maine family of four, one in which both spouses are working, earning about $70,000 combined and filing income taxes jointly, according to Allen.
On the spending side of the equation, 7,100 Mainers would have seen their extended unemployment benefits end, according to Julie Rabinowitz, spokeswoman for the Maine Department of Labor.
Starting in January, people eligible for unemployment benefits would have been able to receive only the standard 26 weeks of state unemployment benefits, without the federal extensions afterward that allowed the jobless to receive checks for up to 99 weeks.
“Even if they do extend it, there’s no way of knowing how long and for what populations of that 7,000,” Rabinowitz said Monday before a deal was reached. “It’s always in everybody’s best interest to actively be looking for work or seeking training, rather than wait to see what Congress’ decision is going to be.”
The defense portion of the federal budget would have been hit especially hard, raising the possibility of cuts that would affect Maine companies heavily dependent on military contracts, like Bath Iron Works, Pratt & Whitney and General Dynamics.
At Bath Iron Works, whose sole business is building warships for the Department of Defense, company spokesman James Demartini said Monday that business progressed as usual as lawmakers strung together a deal.
“In terms of BIW, we’re coming back to work [Wednesday] just like we always do and continue to work on the contracts that are under our wing right now,” he said.
BIW is in the midst of building three next-generation Zumwalt-class destroyers. Demartini said those ships were all funded in prior fiscal years and likely wouldn’t have been affected by the fiscal cliff.
The Maine Department of Education this fall alerted school districts to prepare for cuts to their career and technical and special education funding streams. They also were told to anticipate reduced Title I and Title II funds, which, respectively, help schools educate low-income students and offer teachers professional development opportunities.
The education funding cuts, however, weren’t likely to affect school districts during the current school year; districts would have seen their funding drop at the start of the 2013-14 school year.
Federal spending cuts, according to AARP, would have meant a 29 percent cut to the reimbursement rates doctors and other health-care providers receive for seeing Medicare patients.
“That’s the kind of cut that is catastrophic and would cause a lot of doctors to say, ‘I’m not going to do this anymore,’” and reduce their Medicare patient load or decide not to see Medicare patients altogether, said Gordon Smith, executive vice president of the Maine Medical Association.
BDN writers Matthew Stone and Christopher Cousins contributed to this report.