Mills vetoes bill that would have taxed wealthy Mainers at higher rates

A proposal to add new tax brackets and increase rates for wealthier Mainers was vetoed by Gov. Janet Mills on Friday. 

In her veto message, Mills listed multiple reasons for her veto. Because the bill started as a concept draft — a document without substantive text that is often used as a placeholder before the full bill language is drafted — she said the legislative process didn’t have enough transparency or opportunity for public input. She also said the bill wouldn’t provide meaningful relief for low-income taxpayers and fears it would have unintended consequences for the state budget. 

The bill, LD 1231, passed in the Maine House of Representatives 88-57 and in the Senate 22-12. The proposal would have increased the income threshold for current tax brackets starting in 2025 and created three new income brackets with higher tax rates for wealthier residents. 

It was put forward by Rep. Meldon Carmichael (R-Greenbush) because he said he wanted to specifically help out middle class workers, who he described during the House debate as a “segment of hardworking Maine families that have been continually left behind economically” because of circumstances out of their control. 

Maine may add new tax brackets for residents with higher incomes

Carmichael quoted the governor, who in her annual address said “the state of the state is strong,” but, he added, “the state of hard working families is not.”

Under LD 1231,most earners would have seen the same or lower tax rate while those at the top of the pay scale would contribute a greater portion of their income.

Currently, any single individual making more than $58,050 is taxed $3,686 plus 7.15% of excess over that amount. Couples filing jointly making $116,100 or more are taxed $7,371 plus 7.15% of excess over $116,100.

Under the proposal, there would be three new brackets for individuals making $144,500 and more that would be taxed at progressively higher rates.

Mills, a Democrat, said she shares the “worthy goal” of reducing the tax burden for lower-income people, but she said this bill wouldn’t actually achieve that because of the state’s many exemptions, deductions and credits that more people have become eligible for in recent years.

“The cumulative impact of these changes is that low-income individuals in Maine have little or no tax liability,” Mills said in her veto message. “As a result, this bill would have little or no impact on the taxpayers it is intended to benefit.”

In a statement following the veto, Garrett Martin, president and CEO at the Maine Center for Economic Policy, also said there wouldn’t have been much benefit to low-income taxpayers, “but asking the wealthy to pay more was a step in the right direction.”

“When multimillionaires pay the same income tax rate as a Mainer making just $62,000 a year, it should be obvious that change is needed,” Martin said. “The Maine Legislature should continue to work towards a fairer tax code, and Governor Mills should join the bipartisan effort to do so.”

However, Mills said she fears the bill would have had unintended consequences for the state budget by increasing the reliance on less than one percent of taxpayers. She said those taxpayers’ incomes are “disproportionately composed of highly volatile sources such as capital gains and business income.” 

“At a time when we are already keeping a close eye on Maine’s budget because of increased spending and flattening revenues, there is concern from budgeting officials that relying on more volatile forms of revenue may inadvertently jeopardize the State of Maine’s fiscal standing,” she said.