AUGUSTA, Maine — Sen. Tom Saviello, R-Wilton, has submitted legislation that would tax Maine households’ earned income that exceeds $250,000 at 8.5 percent, the top state income tax rate before Jan. 1, when tax cuts enacted by the GOP-led 125th Legislature reduced the top rate to 7.95 percent. The higher tax only would apply to the portion of a household’s earned income in excess of $250,000.
Republicans touted a reduction in income tax rates as a signature achievement of the 125th Legislature, in which the GOP held majorities in the Maine Senate and House. But Saviello, who is serving his second term as District 18 senator after eight years representing House District 90, told the Bangor Daily News on Tuesday that constituents questioned him about extending the tax break to Maine’s wealthiest residents.
“As I talked to many of my people, they said they could understand lowering the tax rate for working people and changing the estate tax, because that affects farmers and families,” but they didn’t understand the need to give high-earners a tax break, he said.
The legislation has yet to be assigned a legislative document number, according to Saviello. It would focus exclusively on households with earned income and would not apply to small businesses or investment income.
Saviello said a Maine Revenue Services official told him that such an income tax rate increase likely would affect 4,100 tax returns and generate $5 million annually in additional state tax collections. The Republican senator said he’s optimistic about the proposal’s chances for passage and has approached Senate Majority Leader Seth Goodall, D-Richmond, to co-sponsor the legislation. Goodall served as the lead Democrat on the Environment and Natural Resources Committee, of which Saviello was chairman during the 125th Legislature.
Saviello said he has not discussed his plan with Republican Gov. Paul LePage, who regularly touts the income tax rate cuts as a step toward improving Maine’s business climate. Saviello said he first considered proposing the change shortly after winning re-election in November 2012.
“I’m trying to make it palatable for others of my party to be comfortable” with bipartisan cooperation to deal with state government’s fiscal woes, said Saviello, who originally was elected to the House as a Democrat, but left the party in 2005. “If I were in that kind of tax bracket, I think I should pay more. It seems like the right thing to do.”
An earlier version of this story incorrectly said Saviello’s proposal would only affect 300 people. Mike Allen of Maine Revenue Services said the change would affect about 4,100 returns. Allen says he provided Saviello with the incorrect figure.