AUGUSTA, Maine — Gov. Paul LePage has promised he would campaign against any lawmakers that oppose his efforts to reduce, and eventually eliminate, the state’s income tax.
But a tax reform plan being offered by LePage’s Republican allies in the State House falls far short of the governor’s proposal, setting up the possibility they will face LePage’s ire come 2016.
While the party has remained mum for months about their position on the tax reform package contained in the governor’s biennial budget, a GOP document obtained by the Sun Journal Thursday outlines Republicans’ counterproposal, crafted by party members on the budget-writing Appropriations Committee. While negotiations in the committee are ongoing, the document gives the best look so far at the Republican budget negotiators’ goals.
While LePage would reduce the income tax from 7.95 percent to 5.75 percent, the Republican appropriators cut the rate only to 6.95 percent. The size of the cut is likely only to shrink during negotiations with Democrats.
Lead Republican lawmakers on the panel said they would present their proposal to Democrats on Friday, but would not go into details of the plan.
In addition to the difference in the income tax reduction, the Republican plan also deviates from LePage’s in several other places.
LePage’s plan eliminates approximately $62.5 million in state revenue sharing with towns and cities starting in fiscal year 2017, but the Republican document outlines a plan that not only maintains revenue sharing that year but increases it by about $2 million.
The state sales tax is set at 5.5 percent and is scheduled to return to 5.0 percent at the end of the state’s fiscal year on June 30. The Republican plan leaves the sales tax at 5.5 percent and expands it to a broader range of goods and services but not to the extent the LePage plan does. Most professional services, including those provided by lawyers, doctors and accountants, remain free of sales tax under the Republican plan.
Where LePage’s plan reduces the sales tax on auto rentals from 10 percent to 8 percent, Republican appropriators would keep that tax at 10 percent.
LePage also would seek to reduce the tax on meals and lodging from 8 percent to 6.5 percent while the Republican plan suggests increasing that tax to 9 percent.
While LePage’s proposal allows for a sales tax credit for low-income individuals and families based on income, the Republican plan does not appear to include the same credit. And instead of doubling a property tax credit for homeowners 65 and older while eliminating that program for younger homeowners, as LePage would, the GOP caucus’ plan appears to keep the current program in place.
The Republican plan also leaves in place itemized income tax deductions, which the LePage plan eliminates. It also appears to leave in place Maine’s estate tax, which LePage seeks to eliminate. Under the GOP proposal Maine’s estate tax would match the federal estate tax policy of exempting the first $5.5 million of an inheritance from taxes.
The Republican plan was shared anonymously as a spreadsheet marked “confidential.”
On Thursday, Appropriations leaders said they believe their committee would produce a budget that could garner the two-thirds majority support it needs to become law over a potential — and some say likely — LePage veto.
According to state Rep. Peggy Rotundo, D-Lewiston, and state Sen. Jim Hamper, R-Oxford, co-chairs of the committee, the panel has done a good job agreeing on how to spend the $6.57 billion in LePage’s proposed budget.
What the panel has struggled with is how to pay for that spending.
While Hamper wouldn’t discuss details of the soon-to-be-released GOP plan, he did say the committee had several options to consider as it worked to produce a final budget between now and the end of June.
One option, Hamper said, is maintaining the state budget at its current level and with the current tax scheme. As the state budget is operating in the black, lawmakers are under no pressure to devise a budget that cuts spending or raises revenue significantly.
“As far as the budget process goes, we are in the last 10 days,” Hamper said, promising to have the panel’s work done by Memorial Day weekend.
Rotundo also voiced optimism the committee would get its work done in a timely fashion. She said Democrats have three primary goals for the budget, including property tax relief, equitable income tax reductions and that all tax cuts or other programs are paid for — “Not just in this budget but in outgoing years,” Rotundo said.
Rotundo said without a long-term plan to pay for the proposed tax cuts, important state-funded programs, such as public education, would be subject to cuts in the future.
“We are at a standstill at this point,” Rotundo said Thursday. “[We’re] waiting to see what our Republican colleagues want to do around tax reform but we hope we will have that information soon because that’s a critical piece to being able to finish this budget.”
Adrienne Bennett, a spokeswoman for LePage, said she wouldn’t be surprised to see lawmakers take every available minute to work out a final deal.
“The budget always comes down to the last minute, the eleventh hour, and I wouldn’t be surprised to see it come down on the last day or one of the last days [of the lawmaking session],” Bennett said.