AUGUSTA — On a mostly party-line vote, a legislative committee Wednesday rejected a proposal by Republican Gov. Paul LePage that would ask Maine voters to repeal the state’s income tax by 2020.
The proposal seeks to put a ballot question before voters in November that would amend the state’s constitution to prohibit a state income tax, but the bill was rejected by the Taxation Committee on a 5-7 vote, with six Democrats and one independent voting no.
State Rep. Adam Goode, D-Bangor, House chairman of the committee, said unlike his two-year budget proposal, which seeks to reduce the state’s income tax by offsetting lost revenue with an increase and expansion of the state’s sales tax, LePage has not said how he would pay for completely eliminating the income tax.
Democrats argue that to do so would punch a $1.8 billion hole in the state’s $6.5 billion budget. It’s an amount so large that even if the state were to eliminate all funding to public education, the Legislature would still have to find an additional $400 million to make up for the lost income-tax revenue.
“I do not think it’s the full story to say we are going to cut $1.8 billion from the state budget and not have it come out of K-12 education or cause property taxes to go up,” Goode said. “It’s disingenuous for legislators to lead people on that there is not another side to this story.”
But Republicans in the minority on the committee said Democratic concerns were being overblown and that the Legislature would find a way to balance the state’s budget.
State Sen. Paul Davis, R-Sangerville, said the move to eliminate the income tax was the kind of “bold” change Maine needed to help the state’s long-flagging economy.
“I believe that sometimes you have to take a risk,” Davis said after he detailed Maine’s low national ranking as a place to do business. “Our economy in northern Maine is in the doldrums and we have witnessed a downward spiral for years and years and years.”
Other Republicans on the committee agreed, saying to maintain a status quo on Maine’s tax policy was a prescription for continued economic stagnation.
Republicans also argued that voters deserve the opportunity to make the call because the Legislature has been notoriously ineffective at crafting tax-policy reform in Maine.
“It always came down to the bottom line of, ‘The people are going to vote on it and that’s where the decision should be made,'” said the committee’s Senate chairman, Earle McCormick, R-West Gardiner.
Democrats flirted briefly with amending the referendum language so it would reflect to voters that eliminating the income tax in Maine would come at the expense of making huge cuts to state-funded programs and would result in local property-tax increases.
“I would be inclined to support this bill if we amended the referendum to reflect that reality,” said state Sen. Nate Libby, D-Lewiston. “Mainers can choose to eliminate the income tax if they are in favor of cutting funding for roads and bridges, K-12 education and in favor of paying increased sales taxes and property taxes.”
The bill, which calls for a legislative resolve to put the ballot question before the voters, will next go to the full Legislature for consideration. It would have to gain two-thirds support in both the House and Senate to be placed on the ballot.
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