AUGUSTA, Maine — House Republicans on Monday won the latest round of a bruising ideological battle at the State House over LD 849, a bill that would use surplus tax revenue to lower income tax rates.
The 72-68 vote on an amended version of the bill puts the House in concurrence with the Senate on LD 849. It now needs just one more Senate vote and the governor’s signature to become law.
LD 849 has been a priority for House and Senate Republicans over the last couple of weeks, but support for the measure has not come easy.
As written, the measure gradually ratchets down Maine’s top income tax rate to 4 percent by using excess revenue. The original proposal would have used 40 percent of one-time surpluses that normally go into the state’s “rainy day” fund to make the income tax cuts. The amendment cut that to 20 percent.
Supporters, including the governor’s office and the Maine Heritage Policy Center, said it’s a great way to help struggling Mainers by using revenue surpluses for tax relief rather than to expand new programs or invest. That didn’t happen in the 1990s, the last time Maine had a surplus, and the state is paying for it today, they’ve said.
But critics, including the Maine Women’s Lobby and the Maine Center for Economic Policy, have argued that the bill cripples the ability of future Legislatures to craft budgets because it does not account for that lost revenue. Many likened it to Taxpayer Bill of Rights efforts that have been rejected multiple times by Maine voters and others have argued it benefits wealthy Mainers but not the working class. Still more believe it will shift the tax burden to property taxes.
Once the House rejected the bill, the Senate passed an amendment that would set aside 20 percent of one-time surpluses in the tax relief fund instead of 40 percent.
That was enough to convince House Republicans to get on board.
House Democrats were united against the bill on Monday.
“We’re skimming money after we pay bills but before we pay our debts,” said Rep. Bob Duchesne, D-Hudson. “Only the 125th Legislature would vote to lower the levees to protect against the flood waters.”
Rep. Alan Casavant, D-Biddeford, said the best piece of advice he got before joining the Legislature was, “Do no harm.” Casavant said Monday that he believes LD 849 will harm many.
The latest tax policy fight highlights a fundamental philosophical difference in opinion among Republicans and Democrats in Augusta, but it’s not the first time in recent years this fight has reached the State House.
Democrats tried to reduce the income tax rate in 2008 but they proposed offsetting that revenue by setting new sales taxes on goods and services and by raising the meals and lodging tax. The plan was approved by the House and Senate — then controlled by Democrats — and signed into law in June 2009.
Republicans, arguing that the proposed changes were too complicated and did little to relieve the tax burden on Mainers, launched a people’s veto. With more than 60 percent of the vote, Mainers rejected the Democrats’ plan in June 2010.
Now the Republican are in charge — at least for now. Their tax bill is almost certain to be a campaign talking point for both parties as the year progress.
Democrats, betting that they win back control of one or both chambers, likely won’t bother with a people’s veto this time because the next Legislature could undo LD 849. That could reignite the debate all over again.
Sen. Jonathan Courtney, R-Springvale, said late last month that Democrats were playing “class warfare” with the tax bill.
“I’m not afraid to cut the top tax rate. It’s good policy,” he said.
Follow BDN reporter Eric Russell on Twitter at @BDNPolitics.