It was no surprise that Gov. Janet Mills vetoed a modest attempt to return to a more progressive income tax structure. It would have raised taxes for incomes above $500,000 and cut taxes for middle and upper-middle payers.

What is surprising is that lawmakers actually enacted a bill raising income tax rates for the first time since the 1970s — and did so with significant Republican support. Change is in the air.

Mills’s veto message on L.D. 1231 was a concise restatement of Democrats’ previous conventional wisdom on tax policy since the Reagan years, when Congress — including a Democratic House — passed a huge tax cut in 1981 disproportionately benefiting the rich and large corporations.

Cowed by the “Reagan revolution,” Democrats instead promoted “tax relief,” staying away from raising rates on the very people and businesses who could easily afford them. It’s an outdated program. Polling consistently shows that voters were never very interested in cutting taxes for the rich.

While the Reagan cuts were initially popular, deficits they instantly created were not, and continued massive cutting by the George W. Bush administration in 2001 and especially by Donald Trump in 2017 were highly unpopular.

For Maine Democrats, the disastrous low for “tax relief” was a misbegotten “revenue neutral” effort in 2009 to lower the top income tax rate, once 10%, to 6.5% by dramatically expanding the sales tax — a predictably unpopular move.

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Republicans capitalized with a 2010 people’s veto campaign that not only repealed this “tax shift” but set the stage for a sweeping GOP victory that fall, electing Paul LePage and, for the first time since 1974, a solidly Republican Legislature. Republicans lowered the then-8.5% top rate to 7.65%, then again in 2015 to 7.15%, where it stands today. Since Maine’s remaining three brackets are tightly compressed, we have an effective flat tax — where Massachusetts stood until recently.

The new bill would have inched the top rate back to 8.45%, still below the new effective top rate in Massachusetts, 9%, where a “millionaires tax” surcharge on the 5% flat rate — in effect since the 1920s — came about through a voter referendum in 2022. It’s a sign of where voters really are.

Maine voters also enacted an income tax surcharge in 2016, but it was poorly designed and had no broad coalition behind it. It was repealed as part of LePage’s final budget with — alarmingly — consent from a Democratic House speaker.

Voters are clear about their preferences. Even majorities among Republicans say the rich don’t pay their fair share in taxes.

While upper income tax cuts aren’t the sole cause of our staggering inequality, they accelerated the post-Reagan trend that’s created 22 million American millionaires and an estimated 735 billionaires.

Mills’s objection that L.D. 1231 didn’t provide “tax relief” to lower income payers is true — but only because they already don’t pay much if any income tax following the proliferation of credits, exemptions and deductions.

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This tracks the clever Republican strategy of “taking people off the tax rolls” with each new tax cut — though the lion’s share always goes to corporations and high-income individuals.

Low-income people pay plenty of taxes — on property, sales and cigarettes, among others — so eliminating a small income tax liability does almost nothing for their budgets.

Virtually no one files their own taxes any more, even on a state return that mostly piggybacks off the federal return. It’s just too complicated, and a tax code that can’t be understood by the average person is inherently faulty. Maine would do better to return to something closer to the original 1969 model with progressive brackets rising smoothly from 1% to 6% — and a return less than a page long.

Although it’s technically true, as the governor says, that Maine’s current rate is 10th highest among states with income taxes, this ignores a longstanding consensus here favoring the income tax — backed 3-1 by voter referendum in its first big test in 1971.

No big changes will happen while Janet Mills remains governor, but L.D. 1231 gives a hint of things to come. Several states have enacted higher top rates — including California at 13.3%, New York at 10.9%, New Jersey at 10.75% and Minnesota at 9.85% — without significant backlash. And since Massachusetts remains the hub of the New England economy, its 9% provides cover for Maine to experiment.

The Legislature’s Taxation Committee mostly hears bills to create new exemptions for a bevy of special interests, so its House chair, Joe Perry, D-Bangor, understandably called L.D. 1231 “brilliant.”

Could this foretell the eclipse of Reaganomics? The voters, at least, are ready for it.


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