AUGUSTA — A bill that would eliminate the state’s tax on inheritances worth more than $5 million gained approval in the Republican-controlled Maine Senate on Wednesday on an 18-13 party-line vote.
But the GOP victory against what they call the “death tax” is likely to be short-lived, as the Democratic-controlled House voted Tuesday to reject the repeal of the tax that would cost state coffers about $15 million a year.
Senate Majority Leader Garrett Mason, R-Lisbon, said the division on the issue was one of the key philosophical divides between his party and that of the opposition.
“This is a very key thing that Republicans believe is important to address,” Mason said during a speech on the Senate floor.
He added that the state, which is among 19 that still has an estate tax, was wrong to believe it deserves a cut when somebody dies.
“I think the question is: This money was never the government’s to begin with,” Mason said. He argued that estates consist of accumulated wealth that belonged to people who paid income, sales and property taxes.
Other Republicans were less diplomatic in describing their disdain for the state’s inheritance tax policy.
“I’m just going to ask this body to think about what we subject grieving families to, when the government swoops in as a vulture and picks at what is left over,” said Sen. Eric Brakey, R-Auburn.
But Democrats voting in opposition to the tax cut said lawmakers just last year increased the exemption from $2 million to the federal level of $5.45 million. They also noted that supporters of the bill have not produced an alternative source of revenue to fill the estimated $15 million hole in the state budget that eliminating the tax would produce.
Sen. Nate Libby, D-Lewiston, said the tax break would affect about 60 Maine families that would be passing on estates valued at more than $5 million. Libby said that amounted to a tax cut of $250,000 per family.
“In my years in the Legislature, I’ve never seen such an enormous tax cut being directed to such a small number of Maine families,” Libby said.
Other lawmakers noted that about half of those families were out-of-state property owners and not even residents of Maine.
Libby and Sen. John Patrick, D-Rumford, both said very few, if any, of their constituents were subject to the estate tax.
Patrick said he believed eliminating the revenue from the state budget would push more costs onto towns and city governments and onto the backs of already overburdened property taxpayers.
“Where will we get the revenue to make up for this $15 million?” Patrick asked. “That scares the heck out of me because time and time again, everything flows downhill.”
Patrick, who represents much of northern Oxford County, said each state senator represents about 37,000 people, and the vast majority of those people would not be inheriting more than $5 million.
“The thing that my constituents have been complaining adamantly about for the last four to five to six years is that their property taxes are going up,” Patrick said in explaining why he would vote against the repeal.
The Senate vote Wednesday sends the bill back to the House, which is likely to again vote to kill the proposal, bouncing the bill back to the Senate for another vote. But with less than a month left before the Legislature is set to adjourn on April 20, it’s unlikely Democrats and Republicans will reach a compromise on the measure.
Republican Gov. Paul LePage has advocated for eliminating the estate tax, saying it encourages wealthy Mainers to retire out of state and to take their money with them.
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