SCARBOROUGH — Leading Democratic lawmakers hit the second stop on their tax plan tour Tuesday during an event designed to increase exposure to their counterproposal to Republican Gov. Paul LePage’s aggressive and controversial effort to reduce the state income tax.
The 90-minute event, attended by roughly 150 people, was held at Camp Ketcha, a nonprofit organization that would lose its property tax exemption under the governor’s tax plan. House Speaker Mark Eves, D-North Berwick, and Sen. Justin Alfond, D-Portland, did not dwell on the location of the event and instead focused on what they’re calling “A Better Deal for Maine,” a tax plan that also reduces the state’s income tax but distributes the cut away from high earners and toward Maine’s middle class.
Eves called the plan “middle class economics.” Alfond said the governor’s plan embodied his belief in supply-side economics. He said LePage believes that “giving more to the rich will make the economy better,” while Democrats believe investing in the middle class.
“This trickle-down economics philosophy is insanity, it really is,” said Eves, noting that steep income tax cuts and budget deficits in Kansas will lead to early school closings this year. “It really doesn’t work.”
The friendly crowd was largely receptive to the Democratic plan and critical of the governor’s.
Democrats, who released their plan three weeks ago, believe that a smaller income tax cut that hits middle income earners will gain more public favor than LePage’s plan, which provides a deeper tax cut but tilts most of the benefits toward higher earners. A successful pitch by the Democrats could benefit their efforts during ongoing negotiations over the governor’s tax plan and the two-year budget.
LePage, who has held more than a half-dozen town hall-style meetings since releasing his plan Jan. 9, hosted a forum Tuesday evening in Belfast. The governor has ramped up the rhetoric since Democrats released their plan and criticized Eves and Alfond for offering gimmicks instead of real relief. Last week, he transformed the routine process of gathering co-sponsors for his bill to amend the Maine Constitution and eliminate the state income tax by 2020 as a way to challenge Democrats. No Democrats co-sponsored his bill.
Democrats have also countered that LePage’s goal of eliminating the state income tax will come at a high cost to state services, including local education funding and social services programs.
The state income tax currently brings in $3 billion in annual revenue, which is nearly equal to the budget for the Department of Health and Human Services. The governor, who will complete his second term in 2019, has offered vague explanations about how state government will deal with the loss of income tax revenues. However, he has indicated that less revenue will force state government to find efficiencies that lawmakers wouldn’t otherwise contemplate.
Democrats, meanwhile, have offered a doomsday scenario if the governor has his way: Public education will be gutted, the social safety net shredded. Alfond noted that the governor’s plan will create a $300 million hole once his tax plan is fully implemented.
“We don’t believe that’s fiscally responsible,” he said.
Several of the attendees Tuesday said they were worried about potential cuts to local education funding, including Jackie Perry, a member of the Scarborough Board of Education. Other attendees said they were concerned about new taxes
The Democrats’ proposal would lower income tax rates for Mainers earning between $20,900 and $150,000 a year while doubling the Homestead Exemption property tax benefit to $20,000 for all homeowners. The plan also would maintain the state sales tax at 5.5 percent, compared with a 1 percentage point increase sought by LePage.
Democrats also want to increase municipal revenue sharing – compared with LePage’s plan to phase out the program – and rejected the governor’s proposal to collect property taxes on large nonprofit organizations.
Overall, the Democratic plan would provide $120 million in income tax relief to Mainers by fiscal year 2017, compared with the nearly $450 million envisioned in LePage’s plan. The reason for that large discrepancy is Democrats do not offer any tax relief to residents earning more than $150,000 a year, and propose smaller tax reductions than the governor for most other tax brackets.
Democrats have also touted an analysis by the Maine Center for Economic Policy, a left-leaning policy group, and the Institute on Taxation and Economic Policy, a Washington, D.C., nonprofit, that compares their tax plan with the governor’s.
It showed that, on average, the Democratic plan would reduce taxes for the bottom 95 percent of Maine taxpayers. It would also reduce taxes more than the governor’s plan, on average, for the bottom 80 percent of Maine families.
For example, according to the groups’ analysis, the tax for those earning $36,000 to $57,000 a year would decrease an average of $24 under LePage’s plan and $191 under the Democrats’ plan; the tax for those earning $57,001 to $89,000 would decrease by $93 under LePage’s plan and $169 under the Democrats’ plan; and the tax for those earning $167,000 to $371,000 would decrease by $1,275 under LePage’s plan and $1,065 under the Democrats’ plan.
There is some common ground despite those differences. Both sides want to reduce the income tax and believe paying for an immediate cut can be achieved by broadening the sales tax to include additional goods and services.
Lawmakers on the budget-writing committee are working to negotiate a deal as LePage and Democrats hone their pitch to the public. Republicans control the state Senate while Democrats control the House of Representatives. Lawmakers on the budget committee are hopeful that a deal can be reached in mid-May, which would provide a small window to pass the budget before the June 17 statutory adjournment.
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