Lawmakers sent a $6.7 billion two-year spending plan to Gov. Paul LePage early Wednesday morning with the understanding that, starting next year, a majority of Mainers would see a tax cut, though about 17 percent of households would pay more.
The analysis comes from Maine Revenue Services, which modeled tax changes included in the budget based on past tax receipts and future projections for the state’s economy.
The projections show various facets of how the spending plan is projected to affect Maine households, certainly with some margin of error for the complex document that changes many details of the state’s tax code.
That includes expanding the definition of “prepared foods,” which may include peanut butter. Jelly, meanwhile, would remain exempt from sales tax as a “grocery staple.”
Those details, largely worked out behind closed doors in apparent violation of the state’s open meetings law, emerged as lawmakers presented and voted on the compromise plan late in this year’s session.
In aggregate, the budget is projected to lower the tax contribution of each income bracket.
Within each bracket, however, tax officials provided estimates of how many households stand to see tax increases and how many stand to see decreases. That is, for people making $19,017 or less, about 6,580 households are expected to see a tax increase, with an average increase of $47 per filer.
Using that average, those households would pay about $380,260 more altogether, while 129,680 households in that bracket would get a tax break of about $121 on average, or about $15.7 million. The estimates do not provide the range of possible tax increases for each household.
Another way of looking at the changes in the tax plan, more broadly, is how it changes the degree to which each income bracket contributes to Maine’s overall tax revenue stream. In general, the changes are expected to make Maine’s tax system slightly more progressive, drawing more from the top two income brackets while lowering the portion of state taxes for which the third- and fourth-highest brackets are responsible.
In the changes to the distribution of state tax revenue, the plan is similar to LePage’s initial proposal, which included more sweeping tax reforms he viewed as an incremental step toward eliminating entirely the state’s income tax.
While LePage’s influence in the budget-writing process loomed large, notably in a fight over state General Assistance funding for asylum-seeking immigrants, the governor said Tuesday afternoon the Legislature is not yet done with the budget, for which he said he plans to issue line-item vetoes that would have to come before 12:30 a.m. Thursday.
That would allow the governor to reduce the dollar amounts of specific budget items and send those targeted cuts back to the Legislature, where a simple majority vote would be required to override the recommendation.
LePage still could veto the entire budget bill within 10 days. But because the compromise budget bill required the same two-thirds House and Senate majorities needed to override a veto for immediate enactment as an emergency measure, a veto becomes a moot point unless enough lawmakers reverse their support for the budget — essentially endorsing a state government shutdown.
Barring that late twist, the spending plan takes effect starting July 1.