June 26, 2019
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Maine Democrats, Republicans are millions of dollars apart on tax reform

Christopher Cousins | BDN
Christopher Cousins | BDN
Democratic House Speaker Mark Eves of North Berwick speaks during a Thursday news conference at Cony High School in Augusta, where he and other Democratic leaders unveiled a tax reform proposal to compete with Gov. Paul LePage's.

AUGUSTA, Maine — A tax reform plan unveiled Thursday by legislative Democrats would raise the overall tax burden on Mainers by more than $100 million in fiscal year 2016, according to new fiscal analysis data they provided to the BDN.

The plan, which was developed to compete with the austere tax reform proposal released in January by Gov. Paul LePage, is designed to maintain current programs with money to spare to fund public education and property tax relief programs, said Democrats on Thursday.

LePage’s proposed budget also would increase the tax burden on Mainers by about $44 million in 2016 before deep cuts start to kick in.

LePage and most legislative Republicans, however, have made it clear that in addition to tax reform, they want to drastically reduce taxes in Maine. They have not identified what state programs would be cut other than to say some of the cuts can be achieved by finding new efficiencies without devastating services.

Over the four years between now and 2019, when the governor’s plan would be fully in place, the overall tax burden on Mainers will have been reduced more than $645 million compared with current levels. On the other hand, the Democrats’ plan will have added about $167 million in revenue, cumulatively, when fully implemented in 2019.

The Democrats’ tax plan, after generating $108 million in 2016 over current revenues, would generate state revenues projected to exceed the current annual total by $9.3 million in 2017, $19.5 million in 2018 and $30.4 million in 2019.

LePage’s plan, by comparison, would raise $44.3 million over current levels in 2016 and then reduce revenues sharply, by $189 million in 2017, $223.9 million in 2018, and $266.7 million in 2019.

These numbers are projections that could change drastically in four years, but both parties are using them to tout their tax reform initiatives.

Putting these numbers in context

The Democrats’ tax reform plan, and the revenue increases in it, would trigger an annual state budget increase of about 3 percent in 2016.

LePage’s budget proposal, which includes his tax reform plan, would increase state spending by about $44 million next year before trending markedly downward, by about $145 million, in fiscal year 2017. State revenues between fiscal years 2016 and 2017 would decrease by at least 5.5 percent.

How much of an effect would the plans have on programs?

— To put the above numbers in context requires an understanding of the bottom line on the state budget. There are supplemental budget bills in play that will affect the end-of-biennium spending figure when the fiscal year ends on June 30, but the total current biennial budget is $6.41 billion. LePage’s proposed budget for the next two years is $6.57 billion.

— Total state appropriations for public schools in the current year are about $943.8 million and constitute about 30 percent of the overall state budget. Lawmakers from both parties have said that any major cuts to state spending would have to include cuts in education subsidies and social service programs overseen by the Department of Health and Human Services because those two departments consume the vast majority of the budget.

The bottom line? If LePage’s plan went fully into effect, by 2019 it would carve away the equivalent of more than half of the total amount the state spends annually on public schools.

Lawmakers from both parties have begun to articulate their big-picture priorities.

— LePage and Republicans have made it clear that they want, above all else, tax cuts. Legislative committees have been whittling away at many of the elements of LePage’s plan for weeks, making it clear that the tax reform proposal won’t make it to enactment unscathed. Republicans and Democrats alike have found elements with which they disagree.

— Democrats have made it clear that if there are to be deep tax cuts, they should be concentrated in the middle class. They also intend to defend spending for what they say are crucial state services, not the least of which are public schools and higher education. Their tax reform plan proposes leaving the top income tax rate where it is at 7.95 percent and slashing the rate for lower earners. Not unlike the deep cuts proposed by LePage, the fact that their plan includes a $100 million increase in 2016 could be simply a buffer zone they’ve built in that gives them room to negotiate.

So what can we expect?

— The numbers and priorities in the overall tax reform package are so far removed from each other that there could be an impasse when it comes to reform. One scenario is that the parties could negotiate toward the center and, after years of failures, finally make changes to the tax code — such as lowering the income tax and expanding the sales tax base — that lawmakers of all stripes have said for years make sense.

— Because LePage has so intertwined his budget proposal with his tax reform proposal, it would be difficult for lawmakers to extricate the tax code changes from the budget — but not impossible. If negotiations between the two reform plans don’t produce consensus, expect Democrats to try to pull tax reform out of the budget and vote it up or down on its own. There is likely no way an overall tax increase would make it past LePage and Republicans in the Legislature.

— Democrats have made it seem like their reform package is a one-for-one trade-off for the governor’s, but Senate Minority Leader Justin Alfond of Portland said Thursday that the plan is not in its own stand-alone bill and that Democrats intend to amend elements of it into budget negotiations.

That fact alone indicates that the Legislature is in line for a monumentally complicated negotiation where the stakes for Maine in both the short and long terms are huge.

 

Correction: An earlier version of this story stated inaccurately that the Democrats’ plan would raise an additional $100 million a year on an ongoing basis. That was based on a misinterpretation of numbers on a spreadsheet provided by Democrats.


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