A group representing tax accountants in Maine says that if approved, Question 1 on the upcoming November ballot would have significant tax consequences for a wide range of residents, including single wage earners, married business owners and retirees.

But the referendum’s backers say drastic action is needed to address a looming home care crisis in Maine, and that state lawmakers have failed to adequately tackle the problem.

If passed, Question 1 would require Mainers and their employers to split an additional 3.8 percent tax on adjusted gross wage income above $128,400 a year to subsidize the cost of in-home care for the state’s elderly and disabled residents. Other income such as capital gains also would be taxed at 3.8 percent above the $128,400 threshold.

According to the Maine Society of Certified Public Accountants, or CPAs, the resulting state tax rate for combined family incomes in excess of $128,400 would be nearly 11 percent.

“If passed, the bill would position Maine as the state with the third-highest tax rate in the country behind California and Hawaii and the highest tax rate for its wealthiest residents among all the New England states,” says a report issued this month by the Maine Society of CPAs.

In addition, it said, the deductibility of higher state tax payments for federal income tax reporting would be limited for some taxpayers as a result of a $10,000 cap on state income tax deductions included in the 2017 federal tax reform legislation.

The group agrees with an analysis from Maine Revenue Services and the Office of Fiscal and Program Review that the combined income of married couples filing jointly would be subject to the $128,400 threshold, or roughly 10 percent of filers, although the referendum’s backers have said their intent is to only tax married couples on combined income that exceeds two times that amount.

It is estimated that the new tax would generate about $310 million a year from roughly 60,000 Maine households for the universal home care program, although both the dollar amount and the number of affected households would be considerably smaller if married couples filing jointly are not taxed on combined income at the same threshold as individual filers. There are roughly 650,000 income tax returns filed in Maine every year.

CPA society Executive Director Patricia Brigham said the group put together its three-page analysis of Question 1’s impact on taxpayers as a public service to provide a clearly worded explanation that is free from political bias.

Still, the group’s board of governors also said it opposes Question 1, calling it bad tax policy. It is not alone in that belief. Other opponents of the measure include the Maine State Chamber of Commerce, the Home Care & Hospice Alliance of Maine, and all four gubernatorial candidates.

But Mike Tipping, communications director for Mainers for Homecare, which created the referendum, said the ballot measure is necessary because Maine needs a significantly better system for helping residents take care of their elderly and disabled family members. He said state lawmakers have offered only half-measures that don’t adequately address the scope of the problem.

“We are facing a crisis in this state,” Tipping said. “We are the oldest state in the country and we’re getting older. … There are thousands of families that every day are dealing with impossible decisions trying to decide how to care for their loved ones.”

CHANGING DELIVERY OF CARE

According to the Maine Society of CPAs’ analysis, the referendum’s beneficiaries could include anyone living in Maine over the age of 65 who is struggling with at least one activity of daily living, as well as anyone living in Maine who qualifies for disability entitlements. Subsidized home health care services would be available to those beneficiaries regardless of their income.

Activities of daily living include things such as eating, bathing, getting dressed, continence, using the bathroom and transference from reclining or sitting positions to standing, the group said.

The measure would create a universal home care program that would be managed for its first year by a government-appointed board of nine overseers consisting of three members each nominated by the governor, speaker of the House and Senate majority leader.

In all subsequent years, the board would consist of members elected by health care agencies around the state, independent service providers and beneficiaries of the home health care program. Recipients of the program’s services would have their names and contact information made available to health care service providers around the state in order to involve them in the voting process. However, the referendum’s backers said those recipients would have the ability to opt out of the voting process if they did not want their personal information shared.

The program’s funds would pay for care provided by agency workers and independent home health aides. All who receive funds in exchange for their services would be classified as state employees.

To pay for the program, a tax would be levied on every Maine resident with total household income above $128,400, the CPA group said.

Wage earners who are employees would split the cost of the tax with their employers. For every dollar the employee earns above $128,400, the employee would pay a 1.9 percent tax, and the employer would pay a 1.9 percent tax. Business owners and self-employed residents would be responsible for paying the full 3.8 percent tax on their income above $128,400.

Small-business owners with well-paid employees would be hit particularly hard if the referendum passes, according to the Maine Society of CPAs.

If a Maine business generates more than $128,400 a year in adjusted gross income for the owner, and the business owner pays employees more than $128,400 a year, the owner would be required to pay a 3.8 percent tax on business income above $128,400 in addition to a 1.9 percent payroll tax on any income employees earn in wages above $128,400.

“This would be a disaster for our state economy,” said Newell Augur, chairman of the No on 1 campaign, called Stop the Scam.

Tipping and other leaders of the Yes on 1 campaign have said that the referendum’s intent is to allow married couples filing jointly to earn as much as $256,800 before they are subject to the 3.8 percent tax.

They have noted that even if state officials believe the referendum does not currently do that, it could be fixed easily through the legislative process because no one – proponent or opponent – supports the $128,400 income threshold for married couples.

“It’s ridiculous that we’re even talking about this,” Tipping said. “Everyone agrees on what the intent of the legislation is. Any change needed to be made, of course it could happen. The fact that they (the opponents) won’t take ‘yes’ for an answer shows the fundamental dishonesty of their campaign.”

MONEY BEHIND QUESTION 1

Financially, backers of Question 1 have a slight edge over their opponents in funds raised – and spent – according to campaign finance reports at the state ethics commission.

Three major political action committees have raised more than $650,000 in favor of Question 1, compared to $550,000 raised by the No on 1 committee.

The measure’s biggest backers are the progressive Maine People’s Alliance political arm, which has raised $343,00. It contributed $100,000 to the Mainers for Homecare committee and spent most of the rest on canvassing. The Mainers for Homecare committee has raised just over $400,000, including $300,000 from the Service Employees International Union.

In turn, major funders to the Maine People’s Alliance committee include $50,000 from Colorado-based Voqal Fund, which donates or provides grants to an array of progressive political campaigns, and $50,000 from Bend the Arc Jewish Action, a progressive PAC founded by Alex Soros, the son of liberal billionaire George Soros.

The opposition is funded in part by $50,000 donations from the Maine State Chamber of Commerce, the Maine Bankers Association PAC, Maine Association of Realtors, a PAC backed by a Freeport developer called DorksRUs and a $41,000 donation from MaineHealth.

So far, the backers already have spent a good percentage of their funds, and Mainers for Homecare has about $170,000 cash on hand as they head into the heated, final weeks of the campaign. The No on Question One PAC has almost $500,000 left to spend.

Augur, who is also a lobbyist for the Home Care & Hospice Alliance of Maine, said the No on 1 campaign has four primary objections to the referendum.

In addition to the economic consequences, he said the group believes that disclosing home care recipients’ names and addresses for the purposes of board elections would violate their right to privacy.

The opponents also object to the relative lack of eligibility requirements for receiving home care subsidies, Augur said. The referendum would allow wealthy, seasonal residents to qualify for benefits as long as they met the disability and age requirements, he said.

Finally, he said, the board of overseers would not be accountable to lawmakers or the general population because they would not have a say in board elections.

“It is elected not by the taxpayers but only by people who are either receiving money or receiving benefits from the program,” Augur said. “The taxpayers themselves have no oversight over this.”

Tipping said the group’s objections are disingenuous, and that what they really object to is a measure that would force Maine’s wealthier residents to pay their fair share of taxes for a vital purpose.

He said the referendum merely closes a loophole in payroll taxes that benefits the wealthy – currently such taxes only apply to income up to $128,400. He added that the subsidies would boost the pay of home care professionals, who perform a difficult task for relatively low wages, and attract much-needed workers to the profession.

“There are currently 27,000 people in Maine that need home care,” Tipping said. “The current system is serving just under 6,000.”

This story was updated at 11:30 a.m. Oct. 22 to clarify that the state Office of Fiscal and Program Review did not take a position on Question 1.

Staff Writer Noel Gallagher contributed to this report.

 

 

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