Maine lawmakers are, again, attempting to raise taxes on the wealthy

Speaking on behalf of every client she’s represented over her 44 years advocating in the State House — poor families, people in need of health care, mental health services and food — long-time lobbyist Betsy Sweet recounted that each year lawmakers have told those people the government doesn’t have enough money to fully address their needs. 

“That is what we are told,” Sweet said during a budget hearing in February, “but it is simply not true.” 

Sweet, other progressive advocates and the majority of the Taxation Committee are urging the Maine Legislature to raise taxes on the wealthy and corporations in order to generate revenue to pay for services for those in need. 

These proposals echo similar efforts from Democrats across the country, including a “millionaire’s tax” recently passed in Washington state and a federal billionaires wealth tax to fund direct payments to Americans and expand social welfare programs, though passage of the latter is unlikely given Republican control of Congress and the White House.  

These proposals in Maine are not new. Democratic Gov. Janet Mills has rejected or opposed them before. 

Mills, who is serving her final year in office and running for U.S. Senate, has so far refused to touch income taxes. To address a state budget deficit last year, the governor instead opted to raise sales taxes on cigarettes, cannabis and add a tax on streaming services.

Her record on taxation is one of several stances at odds with her primary opponent, political newcomer Graham Platner, who has called for raising taxes on the wealthy and organized a “tax the rich” town hall this winter. 

When Sweet first came before the Legislature in 1982, there were 13 billionaires in the United States, according to Forbes’ list of the wealthiest Americans. Today, there are more than 900. About $79 trillion in wealth has been redistributed from the bottom 90% of U.S. earners to the top 1% since 1975, based on an analysis by the nonpartisan RAND Corporation.

“If you ask anyone — Republican, independent, Democrat, anyone in your districts — ‘Does this economic system work for them?’ You will get the same answer I hear every day, and that answer is: no,” Sweet said during the Feb. 19 hearing. “And, this is all the result of policy. It is not the result of some inevitable drift that we can do nothing about.”

But those on opposing sides of the aisle largely disagree on the policy solution. Members of the Maine Legislature’s Republican minority have argued that raising tax rates will drive out business and high-earners to lower-tax states. Studies on the outcomes of such policies have been mixed.  

The three bills being considered to increase income taxes in Maine were carried over from last year. They would raise the tax rate on corporations, millionaires and alter the state’s tax brackets with the intention to provide relief for the middle class. 

But, they were left in limbo in varying postures last year: caught in the Legislature’s opaque funding process, tabled on the floor, and recalled back to committee for revisions after initial floor votes. Now, lawmakers hope to take them back up. 

The latter, LD 229, was amended by sponsor Rep. Ann Higgins Matlack (D-St. George) last week. The bill seeks to increase the number of tax brackets and add a new top tier for high income earners. 

Matlack originally proposed revenue generated from those changes go to the state’s general fund, not specifying how it ought to be used. Her amended version, which was backed by the Taxation Committee 7-6, instead directs the revenue to other bills that the committee passed with bipartisan support, such as increasing tax credits. 

While that change was not enough to change Republicans’ opposition to the underlying proposal, many commended Matlack for the approach.

“I do understand that we have to look for money to be able to pay for things and I know that our different parties, at times, will pay for things differently,” Rep. Tracy Quint (R-Hodgdon) said. “But I definitely appreciate the work, and I appreciate the heart behind what you’re trying to do.” 

The amended version would put the expected $77.6 million generated toward increasing the Homestead Property Tax Exemption by $7,000 and raising the maximum amount for the property tax fairness credit from $1,000 to $1,500, as well as add more availability for seniors based on age and income. It would also expand the sales tax exemption for certain grocery staples and exempt diapers from sales tax, which is a bill that the Legislature has held for a while because of its price tag. 

“As much work as you’ve done on this, you and I both know you can say you want the money to go to these places — you’re on approps, you have a say — but that doesn’t mean that’s where it will go,” Rep. Shelley Rudnicki (R-Fairfield) told Matlack, referring to her work on the budget committee.

The Legislature’s Appropriations and Financial Affairs Committee both sets the budget plan and decides which bills not accounted for in the budget can get funded with whatever money is remaining. Those bills are put on what’s called the “appropriations table” to vie for this funding, often after passing the full Legislature. 

During the last Legislature, less than 10% of bills that made it onto the “appropriations table” became law. 

That’s where one of the other tax bills currently sits.  

LD 1879 would raise the tax rate on corporations to support the agricultural economy through various funds and programs, such as the dairy stabilization support fund, agricultural marketing loan fund and business recovery and resilience fund, among others. It’s estimated to generate $43 million. 

Both chambers passed the bill last year, and then sent it to the table. Lawmakers on the budget committee opted not to fund it last year and carried it over into the current session. 

Meanwhile, the other tax bill — LD 1089, which proposes a “millionaire’s tax” to fund education — was narrowly rejected by both chambers last year. Washington state passed its own version of this policy earlier this month.

The proposal in Maine would place an income tax surcharge of 2% on the portion of a resident’s taxable income beyond $1 million for single filers, $1.5 million for heads of households and $2 million for married people filing jointly. The estimated $64 million generated from such a change would then go toward funding public K-12 education.

LD 1089 remains tabled in the House. 

Mills’ office did not respond to requests for comment on her latest stance on the three measures, but her administration publicly opposed each last year. 

Mills also vetoed an earlier version of Matlack’s proposal to change the state’s tax brackets during the last Legislature. 

While describing the bill as well intentioned in her veto message, she argued it wouldn’t reduce the tax burden for lower-income people because of the state’s many exemptions, deductions and credits. The governor also cited possible state budget challenges if Maine were to increase its reliance on a small number of taxpayers whose income is disproportionately composed of often volatile business. 

As lawmakers reignite debate on these bills, online ads have been launched by supporters and opponents alike, including the Maine People’s Alliance and the Maine Heritage Policy Center, respectively.