September 20, 2018
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Democratic offer to trim voter-approved surtax fails to break Maine budget impasse

BDN File | BDN
BDN File | BDN
Maine's Speaker of the House Sara Gideon listens to audience questions during a Town Hall meeting hosted by Maine Democratic party leaders, Friday March 3, at the University of Maine at Fort Kent.
By Michael Shepherd, BDN Staff
Updated:

AUGUSTA, Maine — Despite an offer from Democrats in the Maine House of Representatives to increase the threshold for Maine’s surtax on high earners and lower the rate from 3 percent to 1.75 percent, the Legislature’s impasse on a two-year budget stood on Wednesday.

Education funding is the issue largely holding up Maine’s next two-year budget. Discussions are happening behind closed doors between party leaders and members of the Legislature’s Appropriations Committee, which voted out a divided budget last week.

At issue is whether Maine will fund 55 percent of local school costs, a threshold set by voters in 2004 that has never been reached.

Wrapped up in that is whether legislators will keep, scrap or change the 3 percent surtax on annual income above $200,000, which was passed last year by voters to fund schools. As it is, the tax is expected to generate more than $300 million over two years. Republicans want the surtax gone.

That drew House Democrats, led by Speaker Sara Gideon of Freeport, to offer a compromise this week to dial it back, but it didn’t land well. Senate President Mike Thibodeau criticized it on Wednesday for still raising Maine’s tax burden and progressives were angered by what they viewed as a capitulation.

Republicans say it’ll make Maine less competitive and that they’re holding out for a budget that eliminates it. But Democrats kept it in a budget plan they proposed in April to rival Gov. Paul LePage’s original proposal in January.

This week, House Democrats offered a deal to fund education at 55 percent by the 2019 fiscal year while increasing the surtax’s threshold to $300,000 and lowering the rate to 1.75 percent, which is estimated to generate $128 million over two years.

To offset the difference, House Democrats’ plan would find another $114 million by raising the sales tax from 5.5 percent to 5.75 percent, the lodging tax from 9 percent to 10 percent and raising taxes on tobacco products to the same rate as cigarettes.

In statements, Gideon and and Senate Minority Leader Troy Jackson, D-Allagash, pressed Republicans, with Gideon saying they should “join us at the table and finally get serious about finalizing this budget.” Jackson didn’t aid Gideon in advancing a deal, but he said “the ball is in their court.”

Thibodeau released his own Wednesday statement saying House Democrats’ plan “increases the tax burden on the people of Maine.” He made a proposal last week to kill the surtax and offer $100 million in education funding over current levels — not counting the tax — by using existing resources.

Democrats so far have mostly moved in unison on the budget, but the surtax was pushed by the Maine Education Association and the Maine People’s Alliance — loud Democratic constituencies who have been calling on the Legislature to uphold voters’ will.

They were upset on Wednesday, with Mike Tipping, a spokesman for the Maine People’s Alliance, calling Gideon’s offer “a betrayal of the people of Maine” on Twitter. Maine Education Association President Lois Kilby-Chesley called it “a travesty of democracy.”

But the parties will have to meet in the middle to win the necessary two-thirds support for a budget in both chambers. They must get a budget passed and to LePage before the Legislature is set to adjourn on June 21, leaving time to override a likely veto.

This item was originally published in Daily Brief, a free political newsletter distributed Monday through Friday by the Bangor Daily News to inform dialogue about Maine politics and government. To read more of today’s Daily Brief, click here. To have the Daily Brief delivered daily to your inbox, click here.


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