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Maine Bipartisan 'Gang of 11' Proposes Sweeping Tax Reform Plan
05/01/2013   Reported By: A.J. Higgins

The hundreds of sales tax exemptions currently on the books in Maine would virtually disappear under a major bipartisan tax reform proposal brokered by a group of state lawmakers who call themselves the "Gang of 11." They also say their plan would promote economic growth by slashing the state's maximum total income tax rate in half, to 4 percent, and boosting homeowners' homestead property tax exemption from $10,000 o $50,000. A.J. Higgins has more.

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Knight

Rep. Gary Knight, R-Livermore Falls, is flanked by members of the "Gang of 11" at an Augusta press conference.

The "Gang of 11" is a diverse bunch. Members include Republican moderate Sen. Roger Katz, of Augusta, and GOP conservative Rep. Amy Volk, of Scarborough; progressives like Sen. Emily Cain, an Orono Democrat, and independent Sen. Richard Woodbury, of Yarmouth.

Republican Rep. Gary Knight, of Livermore Falls, says that's exactly why this latest attempt at transforming Maine's tax policy just might work. "What is vitally, vitally different this time around is this product is the culmination of effort from a bipartisan group with five Republicans, five Democrats and one unenrolled in any party -- this is huge," Knight said.

How huge? About $700 million in new revenue, derived mostly from the elimination of hundreds of sales tax exemptions on goods and services. In fact, the only exemptions that would remain would be those associated with health care and education costs.

Beyond that, everything would be subject to the sales tax - and not the current 5 cents on the dollar, but a new rate that boosts that assessment to 6 cents. Rep. Amy Volk supports the proposal as a way out of the revenue shortfalls that haunt the state from one budget cycle to the next.

"Economic growth is the only escape route from the vicious cycle of budget crises that we're all too familiar with here in Augusta," Volk said. "Our plan is bold, comprehensive, fair, bipartisan and pro-growth."

What makes the plan pro-growth are some of the perks that supporters hope will attract new residents to Maine. Instead of the current top tax rate of nearly 8 percent, Maine residents would pay a flat 4 percent rate. The Homestead property tax exemption for homeowners would increase from $10,000 to $50,000. Corporate income taxes would also decrease and the estate tax would disappear.

All of these factors, Sen. Richard Woodbury says, should prompt non-residents to consider relocating to Maine to live or do business.

"The four percent income tax makes this a strong pro-growth plan," Woodbury said. "The change to the sales tax and the new refundable tax credits make this a fair plan. The Homestead Exemption addresses more seriously than ever before the property tax problem in Maine, and together these reforms cut taxes on Mainers."

The additional money generated for the state is actually revenue neutral to the $6.3 billion budget submitted by Gov. Paul LePage, since the increases are designed to replace many of the deep budget cuts in state funding for Maine's cities, towns and school districts. Although LePage built the first half of his term promoting and eventually approving $400 million in tax cuts, Sen. Roger Katz says he believes the governor will still be open to the reform proposal.

"Well, we've had a couple of meetings now with the governor. The governor is interested in the proposal," Katz said. "He's got some concerns about it, there's a lot of moving parts, but he's been kind enough to allow us access to Maine Revenue Services to continue to flesh out the details of the plan. And he's also assigned former Sen. Richard Rosen to meet with our group on behalf of the administration, so we're optimistic as that moves along."

Maine Chamber of Commerce President Dana Connors says he and other members of his organization want to give the plan more review before taking a position on the tax reform package.

Meanwhile, David Clough, the state director of the National Federation of Independent Business, says his group supports the income tax cuts, but his members worry that the effect will be cancelled out by the expanded sales tax.

Photo by A.J. Higgins.



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