Maine House OKs budget deal that includes tax cuts, welfare reform

AUGUSTA — A two-year state $6.6 billion budget deal tentatively agreed to by Maine’s top Democratic and Republican lawmakers and awaiting votes in the Legislature will include income tax cuts and welfare reforms but not to the extent Republican Gov. Paul LePage wanted.

Lawmakers did accept some of LePage’s budget proposals including the elimination of the state’s income tax on military pensions and they agreed to increase the state’s sales tax on hotel rooms — bumping it to 9 percent by 2016. The governor’s proposal would have raised it to 8 percent.

Negotiators also agreed to keep a LePage proposal for a 6 percent sales tax for service providers including for basic cable television and interstate telephone calls.

The deal, offered in bits and pieces to lawmakers not involved in the negotiations and the press on Tuesday morning, also keeps in place a 5.5 percent general sales tax that was set to decrease to 5 percent on June 30, as part of a supplemental budget plan enacted by lawmakers in 2013.

As proposed, the deal also lowers the top income tax rate from 7.95 percent to 7.15 percent. LePage’s proposal would have lowered that top rate to 5.75 percent.

Also in the deal is a new limit for state-funded welfare benefits to “legal non-residents” or immigrants who are seeking asylum in Maine but have not yet been given permission from the federal government to seek work legally.

Under the deal, legal non-residents would be eligible for only eight months of General Assistance benefits. The program — funded by state and municipal governments — is meant to help those in financial hardship pay for the basic life necessities of food, housing and medicine.

Also central to the agreement is a change that would see the state cover only 70 percent of general assistance costs, currently three cities — Bangor, Portland and Lewiston — are reimbursed for up to 90 percent of their general assistance costs.

LePage wanted to end all General Assistance benefits for the segment of the immigrant population that is not eligible for other federal benefits.

To reach the compromise, the Legislature is expected to amend a budget bill that was approved by the Legislature’s budget-writing Appropriations Committee on a, 9-4 bipartisan vote two weeks ago.

LePage also told a pair of radio talk show hosts on Tuesday he intended to take the full 10 days, he’s allowed under the law, to decide whether he will sign or veto the bill.

Meanwhile, Maine People before Politics — a political action committee that is run by LePage’s daughter, Lauren LePage — released a statement reminding voters of previous income tax cuts ushered through by LePage.

The release issued early Tuesday echoed themes LePage has used recently, including statements defending his support for poor and working-class Mainers and touting an income tax cut in the state’s 2011 budget that ended income tax for about 65,000 low-income residents.

That budget, crafted by Republican majorities in both bodies, was the only two-year budget plan LePage has signed so far.

“Currently there is a debate over how to help different groups within a new income tax cut,” the release from Maine People Before Politics states. “Those at the lower income levels were already helped — permanently.”

LePage earlier this month was clear his proposed income tax cut was aimed for higher earners and meant as a way to attract wealthy residents to Maine.

“People say everything I do is for the rich, tax breaks for the rich. Well, they are the ones with the money. That’s who I want to invest in Maine,” LePage told a small group of reporters on June 8.

In the release Tuesday, Lauren LePage said the media was overlooking the fact the governor had previously helped eliminate income taxes on the lowest wage earners.

“It is critical for the Maine people and lawmakers to realize that Gov. LePage and legislators took a courageous step in 2011 by lowering income taxes for working people and job creators, while completely eliminating taxes for the working low income Mainers,” said Lauren LePage said in a prepared statement.

“Since that time we have seen unemployment drop, thousands more Mainers find jobs and state revenues actually increase as our growing economy put more money in state coffers,” she continued. “Maine needs an income tax cut which cuts taxes for everyone who pays income taxes. Those at lower incomes have received a tax cut and pay no taxes. We urge legislators to help working people and job creators by simply reducing income taxes for every Mainer who pays.”

While the Maine House of Representatives was expected to vote on the budget bill Tuesday morning that vote was delayed until later in the afternoon as House Majority Leader Jeff McCabe warned lawmakers to be prepared to go home, “after dark” on Tuesday.

The state Senate is also expected to take up the budget bill following the House vote Tuesday.

This story will be updated.

The amended budget agreement:

1) Keeps itemized deductions, but charitable contributions are now counted against the itemized deduction cap.

2) Increases single standard deduction to $11,600 in 2016, adjust annually for inflation.

3) Phases out taxpayer’s deduction (standard or itemized); for single the phase out range is between $70,000 and $145,000 of Maine Adjusted Gross income. The phase out starting point is adjusted for inflation beginning in 2018.

4) Tax brackets for singles in 2016 set at:

• $0-21,050: 5.8 percent (standard deduction up to $11,600)

• $21,051-$37,500: 6.75 percent

• $37,501 and higher: 7.15 percent

Tax brackets for singles in 2017:

• $0-21,050: 5.8 percent (standard deduction up to $11,600)

• $21,401-$50,000: 6.75 percent

• $50,001 and higher: 7.15 percent

(These brackets are based on taxable income with the new, increased standard deduction and will be indexed for inflation starting in 2018.)

5) Takes Sales Tax Fairness Credit in budget, reduce credit before phase out at 60 percent, start single phase out at $20,000 instead of $15,000, but phase out at the same rate as in budget.

6) Military pensions completely exempt; no change to $10,000 retirement deduction.

7) Long-term care premium and Section 529 Plan contribution subtraction modifications eliminated; additional modifications unchanged.

8) $15,000 homestead for all during property tax year 2016; state reimburses 50 percent of additional $5,000; $20,000 homestead for all starting in property tax year 2017; state reimburses 75 percent of additional $10,000.

9) Sales and use tax set at 5.5 percent; meals, 8 percent; lodging, 8 percent until Dec. 31, 2015, and then 9 percent starting in 2016.

10) Service provider tax to 6 percent on Jan. 1, 2016, and repeal exemption for basic cable and inter-state calls.

11) Conforms to federal estate tax exemption beginning January 2016.

12) Removes the top cap on TANF, eliminating the so-called welfare “cliff” and encouraging work without fear of losing benefits.

13) Changes formula for General Assistance to 70 percent reimbursement for all municipalities.

14) Increases funding for nursing homes and section 18 brain injury waitlist; increases funding for PNMI’s from 3 to 4 percent; and increases funding for section 21 intellectual disabilities waitlists.

15) Reforms SNAP, TANF, SSI for legal non-citizens.

*Source: Maine State Legislature

Also on this page: Details of the budget deal