AUGUSTA — Gov. Paul LePage told participants at the Bush Institute Conference on Taxes and Economic Growth in New York City on Tuesday that he wants to further overhaul Maine’s tax policy, including a flat, 4 percent personal income tax and a lower corporate income-tax rate.
“In the state of Maine, that is exactly what we are trying to do, to go down to a 4 percent flat tax with no exemptions for anyone,” LePage said. “The problem I see is this: Until we as Americans decide whether we want to continue down the path of a welfare entitlement country or we want to revive the American dream, we are not going to get there.”
LePage said Maine reduced taxes in last year’s budget but that was only the beginning. He told the group he wants to lower the top corporate income-tax rate from nearly 8 percent to 4 percent.
Former President George W. Bush convened the conference that brought together four Republican governors and several conservative tax experts to discuss tax policy at the state and national level.
Rep. Seth Berry, D-Bowdoinham, the lead Democrat on the Legislature’s Taxation Committee, said both of the governor’s proposals would likely increase overall taxes on middle-class Mainers while reducing taxes on upper-income taxpayers and out-of-state corporations that pay the largest share of the corporate income tax.
“You are essentially taking money from the middle class and giving it to the top,” he said. “Because there is no other way to pay for it than to shift it onto local property taxes. You cut the schools, you cut the aid to towns and cities, and the middle class picks that up in higher property taxes.”
Berry said an analysis done recently by Maine Revenue Services indicated that for a 4 percent top tax rate, the average Mainer would see their income taxes decrease by $241. He said the top 1 percent has the lowest overall tax burden; their income tax would decrease by $21,638.
But, the Maine Revenue Services study is based on the top tax rate at 4 percent with the current provisions allowing various exemptions, deductions and credits. LePage said he wants a flat tax.
The governor told the conference that Maine’s current top income tax rate affects nearly all taxpayers because it starts at $18,000. He said his proposal would benefit all taxpayers by lowering the top tax rate to a flat rate.
Rep. Gary Knight, R- Livermore Falls, the House co-chairman of the Taxation Committee, said he was hearing about the governor’s comments for the first time. He agreed with Berry’s assessment that lowering the corporate tax would mostly benefit large, out-of-state corporations.
“We should be lowering taxes for Mainers, not out-of-state corporations,” he said.
Knight disagreed with Berry on lowering the personal income tax to a flat 4 percent. He said that would provide a simpler tax structure and would stimulate economic growth.
“I really like the governor’s previous statement where he said he would like to eliminate the (personal) income tax entirely,” he said. “That would really boost the economy.”
LePage did not mention that at the New York conference.
Knight said he believes the only way to achieve tax reform is to balance the “big three” taxes: the income tax, the sales tax and the property tax.
“We rely too much on income taxes and property taxes,” he said. “We need to take a broader look at this and not just focus on one tax.”
Knight said he does not believe a significant decrease in income tax rates can be achieved entirely by growth in other state revenues. He said Maine ranks 43rd in the nation for sales taxes as a portion of a state’s tax effort and said expanding the tax to cover more consumption items would be one way to find the cash to reduce the income-tax rate.
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