AUGUSTA, Maine — Tax reform has a new backer, one with significant sway in Augusta.
The Maine Chamber of Commerce announced this week that it supports a comprehensive shake-up in the state’s tax structure, and it wants to see such a plan in the biennial budget that lawmakers are negotiating.
“When you get right down to it, everyone wants this, but it’s hard to make those tough decisions,” said Chamber President Dana Connors in an interview Wednesday. “This is an incredible opportunity for our state.”
Gov. Paul LePage made slashing the income tax and increasing the sales tax the centerpiece of the tax reform plan in his more than $6 billion budget proposal. Democrats have balked at some details of the governor’s plan but have proposed a tax reform effort of their own that includes many of the same broad strokes as LePage’s. Meanwhile, the bipartisan Taxation Committee also has forwarded its own plan to the Legislature’s budget negotiators.
All that is to say that while there are still hard fights to come, many of the key voices in Augusta are supportive, generally, of some kind of tax code change. Connors said that’s why the time for reform is now.
“You’ve got not only a strong leader creating and advocating for it. You’ve got the other party stepping up and putting forward their proposal,” he said. “That’s exactly what you want to see in public policy that stands a prayer’s chance of passage.”
The chamber — the state’s largest business association, with more than 5,000 members — was careful not to throw its substantial weight behind any of the particular plans, but it outlined what it would like to see in a comprehensive tax proposal.
That starts with the reduction of the top marginal individual income tax rate to 5.75 percent, down from 7.95 percent. This goal mirrors the LePage budget plan, and Connors said it is the “centerpiece” of the chamber’s goals.
The group also supports increasing of the sales tax rate from 5.5 percent to 6.5 percent and the expansion of the sales tax base to include more goods and services, which also is found in LePage’s plan. Businesses have been skeptical of such proposals in the past, but Connors said the drop in the individual income tax justifies such an expansion.
That’s because most businesses in Maine, about 70 percent, Connors said, actually file their income taxes the same way as individuals, and thus pay the same rate. A big cut in the individual income tax rate, he said, helps many Maine businesses — not just Maine workers.
Like the governor, Connors also said the chamber believes the corporate income tax rate should be cut. LePage’s budget decreases the rate from 8.93 percent to 8.63 percent, but he has said he wants to see the rate as low as 6.75 percent by 2019.
Connors said the chamber has no firm target in mind.
“It sends a very important message that we’re open for business,” he said. “We don’t want to ignore the corporate income tax, but I’m not sure, in our opinion, that you have to go all the way to 6.75 percent.”
Unlike LePage, the chamber says nonprofits should continue to be exempt from property tax, and it supports expansion of the Homestead Property Tax for all homeowners, not just seniors, as LePage’s plan proposes. Those positions are in line with the Democrats’ proposal.
While the devil’s in the details, the chamber is hopeful that its support will push lawmakers to the bargaining table. After all, Connors said, with so many proposals floated in Augusta, there should be some room to compromise.
But there’s still one big unknown under the State House dome. While Republicans have rallied around LePage’s more drastic plan to eliminate the income tax altogether by 2020, they’ve remained quiet about his budget proposal, which includes a sales tax expansion many in the caucus have previously opposed.
Rep. Adam Goode, D-Bangor, who co-chairs the Taxation Committee, said Wednesday that more players are “sticking their necks out” to back tax reform as the Legislature’s June adjournment date approaches.
“We’re hitting crunch time,” he said. “The big question I have is where do the Republicans in the Legislature stand on this?”
On Wednesday, LePage thanked the chamber for its support in a news release, and he joined them in calling on both parties to come together to get a deal done.
“No legislative study or lobbyist-filled hearing will ever be able to match the voice of Maine small businesses who are demanding job-creating tax reform,” LePage said. “Both parties in the Legislature have an opportunity to unite behind Maine businesses and make tax reform happen. They will only fail if they lack the willpower to put people before politics and make bold decisions for Maine taxpayers.”
Follow Mario Moretto on Twitter at @riocarmine.