Recently, Emily Cain of Orono, Democrat House leader said, “My caucus hates these tax cuts. It hates them. They hate these tax cuts. They hate them.”

Seth Berry, D-Bowdoinham, the ranking minority member of the Taxation Committee, wrote a Maine Compass published in this paper that railed against income tax cuts and Maine estate tax reforms.

The Democrats’ contempt for Republican reforms is surprising because these cuts are designed to shore up Maine’s traditional small businesses, such as farming, fishing and forestry, and reduce tax burdens for the middle class and struggling poor.

ESTATE TAX

Before Republicans controlled the Legislature, Democrats designed the estate tax to punish family-owned small business. Under Democrats, the first million dollars of estate value was exempted from tax, (the federal exemption is $5 million and more than half the states have no estate tax). Up to a 41 percent tax was levied on the value of the estate above the $1 million cap.

Countless small, family-owned farming, fishing or forestry businesses that are equipment and land rich but cash poor could not pass their family legacy onto their children without significant tax consequences. Many successful businesses were forced to sell assets, subdivide property or liquidate completely to pay estates taxes.

Republicans addressed this problem by increasing the exemption to $2 million and created a progressive rate structure that fairly taxes wealthier estates.

INCOME TAX CUTS

Republican income tax reforms were adopted as they were proposed — historic changes that are fair and promise to reinvigorate our economy. It is particularly odd that Democrats opposed these measures because when they ruled Augusta, they designed an income tax structure that was extraordinarily complex, taxed at low income levels, and punished incentive.

Our top tax rate was 8.5 percent and kicked in at $19,950 for individuals and $39,950 for a married couple filing jointly. There previously were four income tax brackets: 2 percent, 4.5 percent, 7 percent and 8.5 percent. We consolidated and eliminated three of the brackets into one flat rate of 6.5 percent and reduced the top bracket to 7.95 percent.

We also create an historic zero percent bracket that allows 70,000 low-income filers to be exempted from state income taxes. Starting in 2013, individuals can earn up to $15,000 and a family of four can earn up to $35,700 before paying state income taxes. Also, the personal exemption is increased from $2,850 to $3,650, and the standard deduction for a married couple filing jointly is increased from $9,550 to $11,400.

DEMOCRATS FALSELY CLAIM

TAX CUTS FAVOR THE RICH

According to Maine Revenue Services, the wealthiest 10 percent of Maine taxpayers pay 55.8 percent of income taxes. Receiving only 43.7 percent of the tax cut, they will pay 57.3 percent of income taxes collected once the cuts are fully implemented.

MRS continues, “We estimate that the lower deciles, (lower and middle classes) will get a bigger reduction in income tax liability (in percentage terms) than taxpayers in the upper deciles.”

This disproportionately higher tax cut for the poor and middle-class is intentional, because Republicans believe putting more money in the hands of working people creates jobs and builds stronger families.

Beacon Hill Institute at Suffolk University estimated that by 2015, the income tax cuts adopted will generate 3,741 new private-sector jobs.

BUSINESS INCENTIVES

Republicans passed the New Market Investment credit to attract investment in economically distressed areas and to promote job creation and business expansion.

We mirrored the federal bonus depreciation incentive and established the Maine Investment Credit, which allows business investment in Maine to accelerate depreciation on new equipment and carry forward the credit for up to 20 years. This change helped larger companies, and we passed a similar change for small companies, for investment up to $500,000.

We made significant policy changes to aircraft manufacturing and sales taxes paid on aircraft parts to enable development of Brunswick Naval Air Station.

We exempted sales tax on fuel used by commercial fishermen and logging companies. We supported full funding of the business equipment tax rebate program (BETR), exempted sales tax on bags in redemption centers, and exempted meals in retirement homes from the meals and lodging tax.

Democrats claim these cuts will place a new $400 million burden on future Legislatures, but it is money that will be placed back in the hands of Mainers.

Republicans believe Mainers need and will spend this money on food, clothing, gas, and necessities like heating oil. We believe Maine business will expand and create jobs.

We also believe most Mainers, especially the 70,000 low-income Mainers who will be exempted under the Republican plan, will love these tax cuts.

Sen. David Trahan, R-Waldoboro, and Rep. L. Gary Knight, R-Livermore Falls, chair the 125th Legislature’s Joint Standing Committee on Taxation. Trahan represents Senate District 20, which includes most communities in Lincoln County as well as Friendship, Washington and Windsor. Knight represents House District 81, which includes Leeds, Livermore and Livermore Falls in Androscoggin County and Wayne in Kennebec County.


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