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Maine GOP Lawmaker Proposes Tax Hike on Wealthy
01/16/2013   Reported By: Patty B. Wight

Congress recently voted to raise taxes on the wealthy. Now, in Maine, a Republican lawmaker is proposing to do the same. State Sen. Tom Saviello has submitted legislation that would hike income taxes on those who earn more than $250,000 a year. As Patty Wight reports, it's just one of what's expected to be hundreds of tax reform proposals submitted in this legislative session.

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Maine GOP Lawmaker Proposes Tax Hike on Wealthy
Originally Aired: 1/16/2013 5:30 PM
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Raising the income tax on the wealthy is not generally an idea supported by Republicans.  But GOP state Sen. Tom Saviello of Wilton says as he knocked on doors to campaign for re-election this past fall, he got an earful from constituents who support it.

"They elected me. They didn't elect a Republican. They didn't elect a Democrat. They elected me to represent them," he says, "and that's what I'm trying to do."

Saviello's bill would levy an 8.5 percent income tax on those who earn incomes greater than $250,000, and would only apply to the money earned over and above that threshold. The emphasis here is on the word "earned." If income is from investments, like dividends, an S corporation, or LLC, then the higher tax would not apply.

"Because in my mind, if this tax change was put into place for people to stimulate the economy, to me, personally, those things, those items - S corporations, LLC, and dividends - are where I have, in fact, invested in what we hope people would do," he says.

Saviello's bill would actually reinstate the previous top income tax rate that just expired in January. Right now, it's 7.95 percent. But bringing it back up to 8.5 percent, says Saviello, would affect about 300 people and generate $5 million for the state.

Saviello is looking for a co-sponsor for his bill - namely, Senate Majority Leader Seth Goodall of Richmond. But Goodall says he needs to see the details first.

"It's premature for me to say if I specifically support all of the components of it," Goodall says. "But it's an idea I'm supportive of discussing."

While Goodall is undecided, independent Senator Dick Woodbury - an economist by trade - gives a thumbs down. He says it's one thing to raise taxes on the wealthy at the federal level, but it's another to do it at the state level.

"And the reason is because people don't decide - based on a high tax rate - to leave the country," Woodbury says. "But there's a lot more mobility state by state. So when you're thinking about this in the context of a state, I find it a lot more problematic."

Woodbury, whose district includes the wealthy communities of Falmouth and Yarmouth, says he thinks Maine's tax system does need an overhaul, but to one that reduces the penalty on residents and takes a fairer share from non-residents.

"We have, ya know, a huge number of Vacationland visitors who are here for a short period," he says. "We have a large number of second home owners. And we have a large number of six-months-minus-a-day non-residents, you know, all of whom spend a lot of time here and use Maine services. And our tax system basically exempts that whole group from our income tax."

House Majority Leader Seth Berry says he's hearing much more talk about tax fairness in the halls of the State House these days, especially after Gov. LePage's most recent budget proposal, which, he says, shifts the tax burden onto property taxes.

"And that is really a shift to the middle class and to working Mainers," Berry says. "So it's making the tax code dramatically unfair and Sen. Saviello's bill, while well intended, would only be a band-aid on what is becoming a gaping wound."

It's unclear what other tax proposals are waiting in the wings for this legislative session. Democratic Taxation Committee Co-chair Anne Haskell of Portland says the deadline for lawmakers to submit their bills is this Friday.

"Those are all confidential, and so after this week when the bills are filed, we should have a better idea of how many tax proposals there are," she says. "And I can't imagine we'd have, oh - a couple hundred bills in our committee before the session is over."

At the earliest, those proposed bills will become public next week.

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