Taxation Committee holds session to hear tax reform ideas

Speaker Cummings submits income tax, property tax relief plans

Augusta – The Legislature’s Taxation Committee held a hearing Monday to solicit tax reform ideas from fellow legislators and members of the public. The public hearing is unusual in that it was not focused on any single bill, but rather was an invitation to present ideas for the Taxation Committee to consider as it moves toward a consensus fair tax plan.

Speaker of the House Glenn Cummings says he is focused on building the momentum around tax reform and making the issue a top priority early in the Legislative session.

“It is important that we consider tax reform early and alongside the other major issues of budget and bonds. In order to be successful, lawmakers of both parties, and all legislative leaders, will have to commit to passing a tax plan for our state, and the early the better.”

House Chairman of the Taxation Committee John Piotti says he wants to focus on solutions and not problems. “I want the Committee and the Legislature as a whole to be able to unite around something positive for our state and not use this opportunity to recite what is bad about Maine’s tax code,” said Piotti.

Speaker Cummings submitted his own tax reform plan to the Committee. Cummings’ tax fairness plan consists of three bills he hopes will target some of the most important tax relief issues facing the state. The three bills are part of a package intended to lower property taxes for elderly Mainers and low-income Maine families, as well as lower income taxes for Maine businesses and workers.

Cummings income tax proposal would deliver income tax relief to Maine people and small businesses by reducing the top marginal income tax rate, and increasing the Earned Income Tax credit and making it refundable for low-income Mainers. The proposal would raise the Earned Income Tax Credit up to $4,000 for single filers and $8,000 for married filers, which would remove as many as 50,000 of Maine’s lowest earners from the state’s income tax liability rolls. Cummings proposal would also lower the top marginal income tax rate from 8.5 percent to 7.8 percent by 2007, in order to make Maine more competitive and lower taxes for Maine businesses. Cummings proposal is revenue neutral, and would be funded by increasing the state’s meals and lodging tax up to 9 and 10 percent respectively.

“This would give working families a deserved income tax break and boost Maine’s economy because many small businesses are disadvantaged by the top marginal rate,” said Cummings. “Increasing the taxes most often paid by tourists creates the best opportunity to provide revenue neutral tax relief for Maine businesses and workers.”

Cummings also submitted a local property tax relief proposal. Cummings is proposing an expansion of the Circuit Breaker rebate program, expanding eligibility and increasing the maximum cash rebates for taxpayers from $2,000 up to $3,000. Cummings third measure proposes a constitutional amendment would cap the increases in property taxes for Maine people over 65 who qualify for the Circuit Breaker, by restricting it to the rate of inflation. The program would allow municipalities to opt in or out, and would include a recapture provision when the property is sold.

Cummings says he will also push for stronger municipal spending controls, citing a recent study that showed 81 percent of School Administration Units had exceed their spending caps as evidence that tighter controls are needed.

“The state, the counties and municipal governments are largely living by the spending caps enacted as part of LD 1,” said Cummings. “But when you see that 81 percent of SAU’s passed budgets in excess of the caps, it tells me we need tighter controls.”

Last week the Taxation Committee came to a bipartisan agreement on a list of Guiding Principles for achieving tax reform. Piotti was hopeful that by reaching consensus on how the committee will move forward, members will be more trusting of one another and therefore more willing to seek compromise.

“The consensus on the process is almost as important as the end product,” said Piotti. “If we can commit to working with each other, the policy will inevitably follow.”

“We have to act to quickly to make Maine’s tax system more fair and stable, and that means building momentum early in the session,” said Cummings. “We have a tremendous opportunity, and we need to make certain lawmakers of both parties come to the table and commit to making progress.”