The Mills administration will not move this year to implement certain tax provisions of President Donald Trump’s megabill, including exempting tips from income taxes.

A spokesperson for Gov. Janet Mills said Friday the tax provisions would cost the state $400 million in the current tax year and the governor believes lawmakers need to weigh in. That won’t happen until the next legislative session begins in January.

“I want to stress that this is not the end of the discussion or conformity to the new federal law,” the Democrat said in a letter Wednesday to the state tax assessor and state lawmakers.

Lawmakers routinely pass bills to make state tax laws conform to federal law. But a new provision enacted earlier this year allows the Mills administration to implement elements of the One Big Beautiful Bill, and hold off implementing others, until lawmakers have a chance to act.

Mills said a larger conversation over the federal tax changes, including whether to make them retroactive to this year, will come “in due course,” once the state has updated economic and revenue forecasts and “when the Legislature is in a position to address Maine’s overall response.”

Although the state is in a good position financially, with roughly $1 billion in its rainy day fund, revenue forecasts suggest the state will see a leveling off in the coming years.

Trump’s bill, which passed this summer, makes permanent his 2017 tax breaks that disproportionately benefit the wealthy, while offering more modest relief for lower income earners. The bill also slashes nearly $1 trillion from Medicaid, although that provision doesn’t take effect until after the 2026 midterm elections.

The lowest income earners would see a net drop in their annual incomes of about 3.1% as a result of Trump’s bill, while the top earners would see a net increase of about 2.7% through 2034, according to the nonpartisan Congressional Budget Office.

Mills directed the state’s tax assessor this week to implement portions of the federal tax law that benefit small businesses, resulting in a projected loss of state revenue ranging from $13.5 million in 2025 to $5.7 million in 2029.

But she also directed the assessor not to adopt most of the other provisions because they would create an immediate and sizable hole in the state’s budget. That includes exempting tips and overtime from state income taxes, as well as provisions that allow people to deduct auto loan interest from their state taxes.

Exempting overtime and tips from state income taxes would cost an estimated $27.8 million and $9.2 million, respectively, the state said. Additional business tax changes for research and development and “bonus depreciation” would cost a combined $238 million, while increasing the standard deduction would cost $30.8 million.

10.1.25_Governor's Instruction RE Conformity 2025 (2) (1) by Maine Trust For Local News

Republicans pounced on Mills’ decision, which comes after Democrats increased some taxes and fees as part of their two-year budget.

“It’s never enough for Maine Democrats,” Senate Minority Leader Trey Stewart, R-Presque Isle, said in a written statement. “Democrats’ angry obsession with opposing anything President Trump touches is going to continue to hurt Maine people.”

Spokespeople for Senate President Mattie Daughtry, D-Brunswick, and House Speaker Ryan Fecteau, D-Biddeford, did not respond to questions about the administration’s directive.

Rep. Amy Arata, R-New Gloucester, noted that seniors will not be able to take advantage of the $6,000 deduction for state income taxes that’s allowed under the bill.

“I hope that legislative Republicans will be joined by our Democratic colleagues to make these tax cuts for working Mainers a priority by passing them either retroactively or convening a special legislative session to pass them as emergency bills,” Arata said.