AUGUSTA, Maine — In a surprising turn of events late Tuesday, the Republican-led Maine House of Representatives rejected a Republican-backed bill that sought to provide income tax relief to Mainers if and when the state has surplus revenue.
The 72-61 vote to reject LD 849 followed significant House debate that began late last week.
The bill goes back for further consideration in the Senate, which approved the bill about two weeks ago.
LD 849 has turned into one of the most divisive battles of the 125th Legislature’s second regular session. As written, the bill increases the size of the top income tax bracket and then gradually reduces the highest income tax rate to 4 percent.
Republicans say it simply gives money back to the taxpayers, something that didn’t happen in the 1990s, the last time Maine had a surplus.
“With every dime we had, we expanded programs,” Rep. Lance Harvell, R-Farmington, said during initial debate last week. “When we have surpluses from now on, let’s look at giving it back, not taking it.”
Democrats argued that the most wealthy Mainers will benefit and said LD 849 would give money back to taxpayers before state programs are paid for.
Rep. Donald Pilon, D-Saco, who serves on the Taxation Committee, last week called the bill “irresponsible” and “bad public policy” that binds future legislatures.
Rep. David Webster, D-Freeport, added: “It’s like if someone wins a scratch ticket for a down payment on a fancy new car even though they know they may not be able to make the payments that are coming up in the future.”
The March 18 party-line vote in the Senate came after an amendment offered by the bill’s sponsor, Senate Majority Leader Jonathan Courtney, R-Springvale. That amendment called for excess revenue to be used first to fully support the state’s underfunded circuit-breaker program and then to provide tax relief.
The House was expected to follow suit with a similar party-line vote but that didn’t happen.
During floor debate late Tuesday, it was mostly Democrats who spoke.
Rep. Bruce MacDonald, D-Boothbay, said everyone wants lower taxes but the impact of this bill is enormous. Rep. Alan Casavant, D-Biddeford, said the bill would shift tax burden to property taxes, which he called the “most hated tax.”
Rep. Robert Duchesne, D-Hudson, urged lawmakers to table the bill long enough to bring its contents back to their constituents.
“Then you can quietly commit this bill back to committee next week, where it can be gently smothered with a pillow,” he said. “Nobody needs to know that we actually discussed skimming 40 percent of the money that was supposed to pay our debts.”
Many Democrats had viewed LD 849 as a backdoor attempt at adopting a “taxpayer bill of rights,” an idea that twice has been rejected by Maine voters in the last decade.
Rep. Seth Berry, D-Bowdoinham, the lead Democrat on the Taxation Committee, said the public never had a chance to weigh in on the bill in its current state because it was rewritten in committee.
“This let us take political credit now and let others make tough choices on how to pay for them later,” he said.
Reducing income taxes without accounting for the lost revenue elsewhere had the potential to create big holes in the state budget, but Courtney said it forces lawmakers to look hard at spending.
“There is enough money for state government without those high income taxes,” he said after the Senate vote.
It’s not clear what will happen to the bill going forward or whether it can be amended to secure enough votes for passage in the House.
Many expected LD 849’s passage to be a talking point for lawmakers leading up to the November elections, particularly about who stands to benefit most from the tax break.
“These are always interesting debates because numbers can be confusing,” Rep. Gary Knight, R-Livermore Falls, House chairman of the Taxation Committee, said late last week. “Those on the top are getting the biggest break, but they are paying the greatest percentage.”
Rep. Walter Kumeiga, D-Deer Isle, countered that this bill only affects income tax, while Maine families pay a lot of other taxes. Taken cumulatively, he said, low-income people are affected disproportionately.
Follow BDN reporter Eric Russell on Twitter at @BDNPolitics.