AUGUSTA — Legislative Democrats were hesitant Thursday to embrace a proposal to eliminate Maine’s income tax, which could be a key pillar in the next budget proposal from Republican Gov. Paul LePage.
LePage’s next two-year budget is due to lawmakers Friday. On Wednesday, the governor was clear that the state’s income tax was in his crosshairs.
“I’ll give you a hint: We are going after the income tax,” LePage said during his inauguration address.
And while key members of the Legislature’s budget-writing Appropriations Committee said they were open to hearing the governor’s proposal — the details of which have been kept under tight wraps — they were leery of how the state would make up half of its revenue, more than $3 billion, over the two-year budget cycle.
The office of Democratic House Speaker Mark Eves of North Berwick issued a media briefing early Thursday warning that income tax cuts and repeals in other states have backfired and damaged those states’ economies more than they helped them.
“The governor has made clear that he would like to drastically cut or eliminate the income tax, which provides critical funding for our schools, towns, roads and bridges and public safety,” the statement read. “Such austerity measures in other states have been bad for the states’ economy, undercut fiscal responsibility and slashed critical funding for schools and services that help our workers and businesses.”
State Rep. Peggy Rotundo, D-Lewiston, House chairwoman of the Appropriations Committee, said, “Everything is on the table,” and she and the committee were “open to all new ideas.”
Still, Rotundo noted, “The income tax is a huge percentage of the entire state budget.”
The memo from Eves’ office warned of how income tax cuts in Kansas and Georgia in recent years have not helped bolster those states’ economics, and have appeared to make them worse.
“Republican governors have included deep income tax cuts as part of ideologically driven economic programs that were supposed to result in strong economic growth and job creation,” according to the memo. “Yet, the policies have not worked.”
The memo goes on to point out that sales and corporate income tax cuts in Georgia led the state to one of the highest unemployment rates in the country at 7.2 percent, compared to 5.8 percent nationally. Maine’s current unemployment rate is 5.8 percent.
An income tax-reduction program in Kansas, ushered through by that state’s Republican Gov. Sam Brownback, has left the state facing a massive budget shortfall and a downgraded credit rating. The Kansas tax-reduction plan is set to roll out over time and is meant to ease the state to a zero-income tax, but lawmakers there are now pondering rolling back the tax cuts, according to the memo.
Maine lawmakers who have worked on tax-reform packages that didn’t gain traction in 2014 said a state income-tax reduction would have to be made up in some other way, unless LePage has plans to dramatically reduce spending.
State Sen. Nathan Libby, D-Lewiston, a member of the Legislature’s Taxation Committee, said he was hopeful LePage’s plan would incorporate parts of a plan he helped author in 2014 that would have broadened Maine’s sales tax as a way of providing income and property tax relief.
Libby’s proposal was part of a bipartisan bill that became known as the “Gang of 11” plan, which would have expanded sales taxes during Maine’s busy tourist season.
“I would be encouraged if the governor proposes a Gang of 11-type bill,” Libby said. He said the proposal did not increase taxes but shifted around who paid them. It didn’t increase the total amount of tax collected in Maine but changed how they were collected.
“It would have exported a large share of tax burden to the tourists who come here and help people pay their property taxes,” Libby said.
It’s a proposal that was often touted by independent candidate for governor Eliot Cutler. Former state Sen. Dick Woodbury, a Yarmouth independent, was also a member of the Gang of 11 and a top Cutler adviser.
State Rep. Erik Jorgensen, D-Portland, a member of the Appropriations Committee, said he couldn’t easily see how LePage could significantly reduce or eliminate Maine’s income tax without finding other revenue to make up for what would be a gaping hole in the state’s budget.
“I don’t want to come out as condemning this until I’ve heard the plan,” Jorgensen said. “I assume they will be presenting this to us as a balanced budget.”
State Sen. Linda Valentino, D-Saco, also on the committee, said she was keeping an open mind because the budget presented by any governor is only a starting point in the debate over how the Legislature will fund state government for the next two years.
Valentino said she expected there to be a fair amount of negotiation over an income tax reduction or elimination proposal that could significantly alter any plan LePage offers Friday.
Republican members of the Appropriations Committee seemed equally eager to hear details of LePage’s tax proposals and budget plan. They likewise seemed to be keeping their minds open.
Rep. Jeff Timberlake, R-Turner, a newly appointed member of the committee, said he was listening closely to LePage’s inauguration address Wednesday and believed the governor gave plenty of clues as to where LePage was looking to find savings.
Timberlake said he expects LePage to find budgetary savings in a variety of places, including in some kind of proposal that may look to consolidate public school administrative costs.
LePage on Wednesday again noted his dissatisfaction with the large number of school superintendents Maine has for a relatively small number of students when compared to other states.
“You heard he wants to change superintendents and there’s a savings there in what he’s proposing,” Timberlake said. He said LePage also wants a unified statewide plan for negotiating teachers’ contracts.
LePage also hinted strongly that Maine cities and towns should be doing more to consolidate services and find savings at the local level.
Some see that as a clear signal that LePage’s proposal will again include reductions in the amount of state tax revenue that is passed down to municipalities.
“I think all of us are concerned about where you get the money from,” said Timberlake, who has also served as town selectman. “How do you do it? We don’t know what he’s laying on the table yet.”
LePage’s office is expected to roll out its budget proposal in three briefings Friday.
The first will be for Republican members of the Appropriations Committee at 1 p.m., followed by a briefing for Democratic members of the committee at 2 p.m., according to state Sen. James Hamper, R-Oxford, Senate chairman of the committee.
Hamper said he did not set up the meeting but was only invited to attend, so he had no insight as to why the public and committee members from both caucuses were not being briefed at the same time.
A public briefing and news conference with the media is expected to take place at 3:30 p.m., according to a release from LePage’s office.
The release offered no details of the pending budget proposal but did include a prepared statement from LePage.
“My biennial budget proposal advances bold reforms that will make Maine competitive with other states and make it easier for Mainers to live more prosperous lives,” LePage said.
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