AUGUSTA, Maine — On Nov. 6, Maine voters will again be asked to take tax and social services policy into their own hands via the citizen initiative process.
Question 1 on the general election ballot reads:
“Do you want to create the Universal Home Care Program to provide home-based assistance to people with disabilities and senior citizens, regardless of income, funded by a new 3.8% tax on individuals and families with Maine wage and adjusted gross income above the amount subject to Social Security taxes, which is $128,400 in 2018?”
The effort aims to solve a long-term, growing problem in Maine’s home health care system, where aides who are now making low wages and are often supported by public funds will be in much greater demand to provide the care that allows elderly and disabled Mainers to continue living at home as the nation’s oldest state ages further.
But the tax and regulatory regime in Question 1 has turned many off and is animating resistance to the law. Those would be the likely culprits if it goes down in November. Here’s what you need to know about it before then.
An old Maine is getting older, and there is high turnover in the low-wage home health care industry. Last week, the U.S. Census Bureau confirmed that Maine was still the nation’s oldest state in 2017 and it is getting older. State projections say that between 2014 and 2034, the share of people age 65 and older in Maine will rise from 15.6 percent to 27.8 percent.
Medicaid is the most important backstop in America’s often unaffordable long-term care system, paying for about half of all long-term care costs nationally while out-of-pocket expenses make up about a fifth, according to the Kaiser Family Foundation. Over the past 20 years, resources have shifted from institutional care toward home care — which is about half the annual cost of nursing homes.
The home care industry rests on low-wage workers. In Maine, home health aides make an average hourly wage of $12.41, according to the Maine Labor Department. Home Care for Maine, a group that cares for 800 adults, pegged annual turnover at 50 percent and said in 2017 legislative testimony that workers left for full-time jobs with benefits “almost daily” and that about a quarter received some form of state assistance.
Newell Augur, who chairs the anti-referendum effort and is a lobbyist for the Home Care and Hospice Alliance of Maine, said the industry has won $16 million in Medicaid rate increases in the Legislature during the past four years, raising hourly reimbursement rates from $15 to $20.52.
The hourly minimum wage of $10 will hit $12 by 2020, which will likely put home health agencies back before the Legislature to ask for higher rates. While Augur’s group wants to work within the existing system to improve it, Question 1 proponents say change won’t happen quickly enough.
The proposal would levy a new tax on high earners to pay for the program — though a board with an uncommon arrangement would control it. The referendum would constitute the most sweeping state effort to address the system, creating a new program to administer home care to people older than 65 and people with disabilities with no regard to income. Rich and poor Mainers would qualify for the program unless it is later restricted.
It would do that by putting a 3.8 percent tax on income and wages over the maximum annual wage amount subject to Social Security taxes, which is now $128,400. While it’s done largely as a payroll tax, it is effectively a way make Maine’s income tax system more progressive.
That fund wouldn’t be a managed by the Maine Department of Health and Human Services, but by a board representing personal care agencies, individual providers and people receiving support services. The board would be able to restrict or expand care according to available funding, and home care workers would be able to unionize.
Proponents argue that the question would provide the framework for higher wages and professionalization. But conservatives’ opposition centers on the tax increase, and the Home Care and Hospice Alliance of Maine has said the organizational arrangement would lead to little public oversight of the program.
The campaign will pit progressives against business interests. The effort to pass Question 1 is led by the progressive Maine People’s Alliance, which will be squaring off against a loose configuration of opposing business interests and health care groups that have organized under an informal banner of “Stop The Scam.”
Proponents sunk nearly $387,000 into the effort as of mid-July through the main committee dedicated to Question 1, according to financial filings. The Maine People’s Alliance put most of that in with another $151,000 coming from the Service Employees International Union, a labor union focused on the health sector.
The progressive group’s general political committee raised $490,000 between December and July. Of that, $350,000 came from the Open Society Policy Center and the Center for Community Change Action, which are linked to liberal financier George Soros. Another $84,000 came from donors giving $300 or less. Another committee dedicated to the question — mostly funded by a group founded by a Soros son — had donated $55,000 by July.
The groups opposing the question put $113,000 into their campaign by mid-July, with $74,000 of that coming from just the top three funders — the Maine Bankers Association, the Maine Association of Realtors and the Maine Hospital Association.
There are differing opinions on whether the tax side of the proposal carries a ‘marriage penalty.’ A tax lawyer says it does, but it’s not proponents’ intent. The administration of Gov. Paul LePage — a Question 1 opponent — has said the taxes would generate $310 million per year. The liberal Institute on Taxation and Economic Policy pegs it at $186.3 million. That difference is because of two interpretations. The state sees a costly “marriage penalty.”
A Maine Revenue Services analysis says Question 1 likely would apply to households whose income adds up to $128,400 — such as a married couple with two spouses each earning close to $70,000 — because of existing state law.
The Institute on Taxation and Economic Policy interprets the proposed law as applying to individual earners. Mike Tipping, a Maine People’s Alliance spokesman, said opponents are using the so-called marriage penalty as a distraction, but proponents would be “happy” to support a legislative fix matching their intent to only hit individuals. Courts also evaluate intent if asked to analyze questions about it.
Christopher McLoon, a tax lawyer with Drummond Woodsum, a Portland law firm, agreed with the state’s interpretation and called the regime in the law a difficult-to-administer “dog’s breakfast” that tries to “fit a payroll tax into an income tax regime” that is full of potential loopholes.
Under the wide interpretation, David Heidrich, a spokesman for LePage’s budget department, said the law would hit more than 58,355 Maine tax families — with 85 percent filing jointly — and 3,800 non-resident families in the 2019 tax year. Those assumptions underlie a separate analysis from the LePage administration projecting negative impacts on Maine’s economy.
But the narrow interpretation from the Institute on Taxation and Economic Policy said that 73 percent of the impact would be borne by the top 1 percent of Maine earners, who made $452,000 or more in 2018.
The Legislature would have to do significant work to implement it — or it could roll it back. Confusion about the tax regime underscores the potential need for many technical fixes from the Legislature if Question 1 passes. The proposed law also builds in a three-year ramp-up period in which the board and lawmakers will finalize finer points of the program.
However, we have seen referendums stall after passage before. Many of the same groups in play here were also on opposite sides of the 2016 referendum that placed a 3 percent surtax on high earners to fund schools but was dumped by the Legislature in a 2017 budget deal.
All four of the candidates running to replace LePage in 2018 oppose Question 1. The Legislature is likely to stay somewhat closely divided between Democrats and Republicans, which will necessitate a similarly fraught budget compromise next year.
Would the initiative have the political clout to survive? It’s a question that may or may not have to be answered after the election. But it’s certainly no slam-dunk given Maine’s recent history.
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