Mainers could get a $111 million tax cut under a state income tax overhaul proposed by Gov. Paul LePage.

On Thursday, the administration rolled out a bill that aligns Maine’s income tax regime with the $1.5 trillion federal tax law passed by Republicans last year.

“The administration is presenting legislation designed to achieve bipartisan support and enactment during the current legislative session,” Alec Porteous, commissioner of the state Department of Administrative and Financial Services, said Thursday at a joint meeting of the Legislature’s Taxation and Appropriations committees. “As you know, Gov. LePage favors closely conforming to the updated federal code, but he has made clear that he would not support any conformity measure that raises taxes on Mainers or Maine businesses.”

The Conformity and Family Tax Relief Act would reduce personal income taxes by about $87.4 million and business taxes by $24 million over the next two years.

The LePage administration plans to pay for the tax breaks with $88 million in projected revenues and $23 million in corporate assets brought back to the U.S. from foreign countries. Maine ended its most recent fiscal year in June with a revenue surplus of $111 million.

“We are expecting more revenue in, we are just turning around and giving it back to taxpayers who paid it,” Porteous said.

CRITIC: TOO MUCH GOES TO WELL-OFF

The proposal was immediately denounced by a left-leaning policy group that said LePage was doubling-down on giving tax benefits to corporations and the rich.

“The wealthiest and profitable companies are getting a tax break,” said Sarah Austin, a policy analyst from the Maine Center for Economic Policy.

Paying for tax breaks with revenue that could be used for health care and other programs is the wrong move, she said.

“Using such a huge chunk of that to give tax breaks to people who don’t need it is a missed opportunity,” Austin said.

The only bill provision not aligned with the new federal tax law is designed to avoid a tax increase of over $230 million that would fall largely on low- and middle-income families if the state eliminated the personal income exemption, as the federal law did.

The federal law removes the $4,150 individual exemption and compensates for it by doubling the standard deduction, Porteous said. But Maine’s existing $11,800 standard deduction is nearly the same amount as the new, higher federal standard deduction, so Mainers would get almost no relief by copying it, he said.

Instead, the administration proposes a zero tax rate on the first $4,150 of an individual’s earnings and the first $8,300 of earnings for joint filers, as well as a $500 child tax credit to replicate the federal exemption.

The bill also would double the estate tax exemption to $11.2 million and provide business tax breaks for depreciation, net operating losses and interest deduction.

LePage also has proposed reducing the top business tax rate from 8.9 percent to 8.3 percent in 2020, to mitigate the tax increase that would come with full conformity, Porteous said.

DEMOCRATS CAUTIOUS ON PROPOSAL

Some lawmakers questioned certain aspects of the bill, such as the way the administration planned to pay for the tax cuts. Others said it should be altered to focus more on helping the middle class. The bill is expected to come back to the Taxation Committee for a public hearing sometime this month.

Speaker of the House Sara Gideon, D-Freeport, released a statement Thursday saying any overhaul to the state income tax code should be designed to maximize the financial benefit to middle-income families.

“There is no requirement for Maine to automatically conform with any proposal from the federal government, especially if it will affect our ability to strengthen our economy and our communities,” she said. “Democrats will support a tax conformity package that will grow and strengthen the middle class, that will make education and training more affordable, and that encourages businesses to start up and create jobs right here in Maine. We look forward to the opportunity ahead.”

Rep. Gay Grant, D-Gardiner, wants the administration to outline other changes to the state tax code not written explicitly in the governor’s bill that would occur if Maine conformed to the federal tax code.

“We are, after all, talking about the largest tax change in decades,” Grant said. “It is like buying a car and wanting to make sure you are reading the fine print.”

Peter McGuire can be contacted at 791-6325 or at:

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