AUGUSTA — What Mainers will end up paying in income, sales and property taxes under Gov. Paul LePage’s far-reaching tax overhaul plan will begin to take shape in the Legislature this week as lawmakers start to dissect the governor’s $6.3 billion state budget proposal.

Public hearings before the 13-member Appropriations and Financial Affairs Committee are expected to continue through Feb. 25 with most sessions devoted to the governor’s complex tax initiative, which is expected to generate opposition from affected interest groups. The panel, working at times with the Taxation Committee, will negotiate, change and vote on the two-year budget before sending it to the full Legislature for enactment.

The hearings can become repetitive, and the budget is typically one of the last bills settled by the Legislature during a session that stretches well into June. Nonetheless, new or unexpected information occasionally surfaces. Such was the case Tuesday, when lawmakers learned that implementing the governor’s budget will require doing something once seemingly antithetical to his brand of conservatism: growing government.

Specifically, LePage’s budget will require hiring seven additional tax auditors and examiners within Maine Revenue Services, the agency charged with executing the governor’s tax plan should it survive legislative scrutiny.

The nearly $500,000 request for seven more staffers to implement the reform initiative is in addition to $1.8 million that Maine Revenue Services is requesting to pay down a loan for a new web portal for tax filers, expanded technology to verify tax returns and five new technical staff positions.

The additional spending is a fraction of the governor’s spending proposal. However, it underscores the breadth of a tax initiative that LePage’s budget chief introduced Tuesday as historic, if not unprecedented.

“For the first time in history, or in recent memory, a governor is leading the charge to reform Maine’s antiquated tax system,” said Richard Rosen, the commissioner of the Department of Administrative and Financial Services.


Rosen said the tax plan had four objectives: To make Maine’s tax system competitive, simple, stable and fair. However, it was immediately clear that some Democrats on the budget committee have a differing view of how to reach those objectives.

The governor’s plan is similar in concept to a tax reform that was enacted by the Democrat-controlled Legislature in 2009 and repealed by voters in 2010 through a Republican-led ballot initiative. Democrats on the budget committee Tuesday took specific aim at LePage’s claim that his tax plan and longer-term goal of repealing the state income tax will draw more people to Maine.

The governor wants to cut the top income tax rate from 7.95 percent to 5.75 percent and save taxpayers a projected $938 million over the next four years. He has proposed replacing some of the lost revenue with measures that include increasing the sales tax rate to 6.5 percent. The rate is now 5.5 percent, and it was supposed to fall to 5 percent at the end of the fiscal year on June 30.

The administration has argued that the income tax cut is necessary to drive business investment and increase migration to Maine, but Democrats question whether the state will be able to make up the $500 million loss in income tax revenues LePage’s proposal projects for the budget years 2017 and 2018.

Rep. Gay Grant, D-Gardiner, told Rosen that she hoped the administration could move beyond “anecdotes” and present hard data to back its proposal. “We’re trying to base tax policy on actual facts,” Grant said.

According to the most recent available Internal Revenue Service migration data, based on 2010-2011 tax returns, the states with the most residents moving to Maine are Massachusetts, New Hampshire and Florida. New Hampshire and Florida do not have a state income tax, although the Granite State taxes annuity and investment income.

The Democrats’ questions signal that the party, which controls the House of Representatives, plans to focus debate on whether the income tax cut will produce the economic benefits anticipated by the administration. Republicans control the Senate, but they have not fully endorsed the tax plan. LePage told an audience at a public appearance to promote the budget in Westbrook last week that he expected Democrats and Republicans to oppose his proposal, but he was hopeful that enough lawmakers from both parties would come together to pass it.

Rep. Adam Goode, D-Bangor, said the income tax rate cuts could create future deficits. Unlike in 2011, when the Republican-led Legislature passed a significant income tax cut, Goode said lawmakers today have fewer options to pay for the reduction in future years. That’s because the governor’s budget eliminates municipal revenue sharing, which lawmakers tapped in 2013 to pay for the 2011 tax cut.

“My concern is that this is a back-door way to cut education,” said Goode, contending that there are few other state programs that future lawmakers could turn to for plugging future revenue gaps.


Republican lawmakers have had a relatively muted public reaction to the governor’s tax plan. That remained the case on Tuesday, as Rosen described a plan similar in concept to the one that Republicans helped defeat at referendum in 2010.

Rep. Jeff Timberlake, R-Turner, told administration officials that he was concerned about the expansion of Maine Revenue Services. While the administration said the new staff positions could be temporary, Timberlake said, “I’ve never really seen government get smaller.”

Assorted interest groups voiced support for the specific elements of the tax plan but raised alarm about others. The Maine Association of Realtors, for example, said cutting the income tax was a laudable goal, but expressed concern about a proposal to eliminate itemized deductions, specifically the home mortgage interest deduction.

Some liberal interest groups like Maine Equal Justice Partners applauded the governor’s plan to ease the sales tax increase with a refundable tax credit for low-income Mainers. However, the same groups also challenged the income tax cut, saying it would disproportionately benefit the wealthy.

The budget committee, made up of seven Democrats and six Republicans, will take testimony on the property tax portion of the budget, including the proposal to eliminate municipal revenue sharing on Wednesday.

Steve Mistler — 620-7016

[email protected]

Twitter: @stevemistler

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