CAMPAIGN 2014

What Maine’s candidates for governor earn — and pay in taxes — shapes campaign strategies

Posted July 18, 2014, at 7:38 a.m.
Maine gubernatorial candidate Eliot Cutler
Maine gubernatorial candidate Eliot Cutler Buy Photo
U.S. Rep. Mike Michaud, the Democratic nominee in the 2014 governor's race, reflects on his future after politics at a piece of property he owns in Medway on Saturday, July 12, 2014.
Christopher Cousins
U.S. Rep. Mike Michaud, the Democratic nominee in the 2014 governor's race, reflects on his future after politics at a piece of property he owns in Medway on Saturday, July 12, 2014. Buy Photo
Governor Paul LePage speaks at a campaign event in a gravel pit in Gray where he received the re-endorsement of the Maine chapter of the Associated Builders and Contractors in May.
Governor Paul LePage speaks at a campaign event in a gravel pit in Gray where he received the re-endorsement of the Maine chapter of the Associated Builders and Contractors in May. Buy Photo

AUGUSTA, Maine — The way Maine’s three major candidates for governor make their livings and pay taxes — state, local and federal — varies greatly.

One pays more in state property taxes than he would earn as governor. One pays property taxes in Florida but not in Maine. And one pays about $500 less in property taxes on his home and a woodlot than the statewide median, according to information the candidates provided to the Sun Journal.

The tax and income figures are for 2013 and are based on information provided by the campaigns.

Independent candidate Eliot Cutler, who campaigns among other things on a property tax reform plan, pays roughly $76,000 annually in property taxes on his seaside home in Cape Elizabeth. Maine pays its governor an annual salary of $70,000. Cutler also pays $6,320 in property taxes in the town of Hancock and another $6,126 in property taxes in the U.S. Virgin Islands.

Incumbent Gov. Paul LePage, a Republican, pays no property taxes in Maine but pays about $2,500 on property he owns in Florida, according to information released by his re-election campaign this week. That’s about $800 more a year than that state’s median property tax.

Maine’s 2nd District U.S. Rep. Mike Michaud, the Democrat in the race, pays $1,215 for his home in East Millinocket and another $286 for a woodlot in Medway, for a total of $1,501.

Michaud said he didn’t mind disclosing his financial information and that he intends to someday retire on the Medway property.

“It’s important for voters to understand who the candidates for governor are, and that includes where they live, how they’ve earned a living and how tax policy affects them personally,” Michaud said Thursday. “As for me, I’m looking forward to building a log cabin on my woodlot and plan to be paying property taxes there for the rest of my life.”

Both property and income taxes are hot issues in the Maine’s 2014 race for governor. As LePage touts his record of passing the largest the state income tax cut in history, Michaud says that break largely benefits the state’s wealthiest residents while pushing more costs onto property taxpayers.

Income

On the income and income tax side of the ledger the candidates also reported widely varying amounts.

Cutler and LePage both file joint returns with their spouses, while Michaud files an individual return.

For 2013, Cutler and his wife, Melanie, reported a total income of $782,957 while paying $195,585 in federal income tax and $44,073 in state income tax.

LePage and his wife, Ann, reported a total income of $97,525, including the governor’s salary of $70,000 and the proceeds from a real estate sale. They paid $12,692 in federal income tax and $6,468 in state income tax.

Michaud reported a total income of $200,003 including his congressional salary of $174,000, and the proceeds from the sale of two properties in Maine as well as some pension income.

Michaud also reported a loss of $2,254 on rental properties he owns.

He paid $35,479 in federal income tax and $11,692 in state income tax, according to data provided to the Sun Journal.

In 2012, Cutler placed his Cape Elizabeth property in a trust run by a limited liability corporation that he heads. It is incorporated in Delaware.

Cutler said the move was recommended by his legal and tax advisers and is common for properties that have multiple owners. Cutler said all of his property is owned jointly with family members including his children, his brother and his wife.

“An LLC is a very common form of ownership when multiple owners and multiple generations of owners are involved, ” Cutler said in a prepared statement. “So this was the ownership structure recommended by my legal and financial advisers for management and financial planning purposes.”

Cutler leases his home back from the LLC but said it has no bearing on the amount of property tax he pays.

“The important point here is that I pay exactly the same amount of property taxes that I would pay if the properties were in just my name or Melanie and I as joint owners,” he said.

The arrangement is similar to one employed by former President Bill Clinton and his wife and former U.S. Secretary of State Hillary Clinton. Critics of the practice have said while it isn’t illegal, it does allow those with wealth to avoid paying taxes on their estates when they die.

Estate tax

Cutler has also spoken out against Maine’s estate tax during campaign events. In March he told a group gathered in Brunswick that Maine’s estate tax was one of the primary things that pushes Maine’s wealthiest residents to retire elsewhere.

“There are three factors that drive people my age away from Maine. One is the estate tax. That matters to wealthy people, it doesn’t matter to others,” Cutler said at the time. “But when we drive the wealthy out of Maine, we’re driving away a lot of investment in this state.”

It’s a position he and LePage have in common. In his February 2014 State of the State address, LePage proposed eliminating Maine’s estate tax altogether.

“It would encourage retirees to stay in Maine,” LePage said.

Ben Grant, the chairman of the Maine Democratic Party, said Cutler’s and LePage’s stances on the estate tax show they are disconnected from the average Mainer.

“Two of the candidates want to create one set of rules for the wealthy and another set of rules for everyone else,” Grant said. “Mike Michaud is the only candidate who’s looking out for the best interests of working Mainers and growing Maine’s middle class.”

Cutler’s campaign refutes that and has been on a “property tax road show,” touting a proposal that would broaden the state’s sales tax to lower property taxes.

But even under that proposal, according Cutler’s campaign spokeswoman Crystal Canney, the amount Cutler pays in property taxes would actually increase by $2,145.

Neither Cutler’s wealth nor his legal efforts to protect it are that damaging to him among voters, according to at least two political scholars in Maine.

Sandy Maisel, an author and professor of politics and government at Colby College, said Cutler’s wealth means he is not going to be “beholden to anybody.”

Maisel said putting a home in an LLC is not all that “common” because it’s mostly a practice employed by the “wicked rich.” But it doesn’t mean there’s anything necessarily wrong.

Maisel said Cutler’s wealth does, however, accentuate both Michaud’s and LePage’s working class roots.

“Nobody could ever claim that Congressman Michaud or Gov. LePage are so wealthy they don’t understand the working man,” Maisel said. “I don’t understand, or I don’t even begin to understand how Gov. LePage thinks he represents the people of the state of Maine of his income level or of his background, but it is what it is.”

Canney said Cutler too worked for what he has and is successful largely because his parents valued education because it created opportunities, which he seized. Canney said Cutler wants to use his skills and background to create opportunity for others.

Maisel said it’s easier to see Michaud’s connection to the working class given his years as a paper mill worker.

“Cutler is cut from a different cloth and it’s difficult to see how he represents the average Mainer in my estimation, and I think the average Mainer feels that way too,” Maisel said.

Maisel said there may be an issue among voters with LePage not paying any property taxes in Maine but the issue isn’t a new one and is one LePage was able to overcome in 2010, when he first won statewide election.

He said not paying any property taxes in Maine suggests LePage doesn’t really, “live in the state of Maine.”

Jim Melcher, a political science professor at the University of Maine at Farmington, said some critics are also making a point of LePage not personally feeling the impact of state reductions to its revenue sharing program with towns and cities, which they say have caused property taxes to shoot up.

LePage has proposed various cuts to the program in recent years suggesting cities and towns are not doing all they can to consolidate services and share costs to bring down property taxes.

But as for LePage living only in the Blaine House, Melcher said he thinks that issue ultimately, “doesn’t cut that much ice with people.”

 

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