Risk of impasse grows as Republicans reject tax increases to plug budget hole

The State House in Augusta.
The State House in Augusta. Buy Photo
Posted June 04, 2013, at 9:58 p.m.

AUGUSTA, Maine — Lawmakers on the Appropriations Committee reached an apparent impasse on the budget they have only two days left to complete Tuesday night when the conversation turned to tax increases.

Democrats said they would stop trying to repeal huge income tax cuts passed by Republicans two years ago with hopes that the move would serve as a bargaining chip, but Republicans weren’t dealing.

Despite considerable lip service from both parties about unacceptable portions of Gov. Paul LePage’s biennial budget proposal and a constant exchange of niceties, deliberations Tuesday night ended with no obvious path to resolution.

At issue is a $6.3 billion proposed budget for the two years beginning July 1. The budget needs two-thirds support in the Legislature whether LePage vetoes parts of it or not, and LePage has said stridently and continually that he won’t support any tax increases nor a repeal of the previous tax cuts. Failure to enact a budget by the end of the month would result in a shutdown of state government. The Appropriations Committee must finish its work by Thursday to give the full Legislature enough time for enactment before adjournment.

After a long conversation on ways to soften LePage’s proposed $200 million cut of municipal revenue sharing and strengthen funding for education, the talk turned to how to fund those initiatives and others.

“It’s clear to me that we need to still come up with more money than is in the budget and that we are achieving through cuts,” said Sen. Dawn Hill, D-Cape Neddick. “Our conversation needs to move to revenue and we can’t act like that elephant is not in the room anymore.”

Sen. Emily Cain, D-Orono, led off the conversation with an attempt to neutralize tension that has been building for two years over tax cuts passed by the then-Republican-controlled Legislature. Among those cuts was a reduction of the top income tax rate from 8.5 to 7.95 percent, a doubling of the estate tax exemption and the elimination of income taxes for some 70,000 low-income Mainers. Democrats have long blamed the state’s budget woes on enacting that revenue cut when receipts were already dismal because of the economy.

“On behalf of our caucus I want to take off the table the push for repeal of the 125th [Legislature’s] tax cuts,” said Cain. “This is difficult and significant. … We have been listening in the last several weeks as this proposal has been discussed. It has become clear that that is a roadblock to passing a budget.”

Sen. Patrick Flood, R-Winthrop, the only Republican senator on the committee, acknowledged what a breakthrough move that was by Democrats.

“People have made good careers about arguing whether those tax cuts were good or not, but we felt they were very, very important,” he said. “You’ve responded and we cannot tell you how that really helps this process move forward.”

Various Democrats on the committee were intent on reducing the municipal revenue sharing cuts and restoring two major property tax relief programs proposed for cuts by LePage, which they said would trigger property tax increases at the local level by up to $275 million.

“There are $275 million in property tax increases in the governor’s budget that I’m proposing we reduce,” said Rep. Michael Carey, D-Lewiston, after an impassioned speech about how the revenue sharing cut would devastate his community.

Among the revenue proposals offered by Democrats was a $1.50-per-pack tax on cigarettes that could raise more than $90 million over the biennium; taxes on other tobacco products that would raise $20 million; and a 2-cent increase on meals and lodging that could generate $60 million. However, the proposal that had the most support among Democrats was temporarily raising the sales tax from 5 percent to 6 percent, as was done during a previous economic recession in the 1990s.

“When I’m out of this building, the most common thing I hear is, ‘Emily, last time we had this big problem, we raised the sales tax and then we rolled it back,’” said Cain. “It’s simple and straightforward. Everyone is familiar with it.”

Rep. Kathleen Chase, R-Wells, the ranking Republican on the committee, said her party has no appetite for more tax increases, even if they’re temporary.

“In our caucus our problem is that we don’t want to see any more tax burden out there on the people,” said Chase. “We just don’t. … At this point we’re just not ready to look at any revenues until in our minds, in our hearts, in our caucus and with our people, there have been some promising savings proposed. That’s where we are.”

The committee adjourned its public deliberation at nearly 9 p.m. and said they were heading into private negotiations that would last late into the night. Meanwhile, Republicans announced that they will host a press conference on the budget Wednesday afternoon, though there was no hint of what they might say.

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