April 17, 2023

A Bold Plan to Abolish Income Tax in Maine Faces Resistance

As Maine lawmakers continue to debate the possibility of eliminating income tax in the state, the controversial proposal is garnering attention from residents and businesses alike. The bill, which aims to phase out income tax over five years, starting in 2024, is currently facing strong opposition from Democrats, who control both the House and Senate in Maine’s State House. Despite the bill’s uncertain fate, its proponents argue that this bold move could lead to significant financial benefits for Maine’s residents and businesses.

The bill, proposed by Representative David Boyer of Poland, is designed to gradually decrease the state’s income tax each year, allowing each state department to adjust their annual budgets accordingly. Boyer believes that this incremental approach provides departments with enough time to identify wasteful spending and make necessary cuts. He argues that while the state’s budget has increased by about 20% since the last budget, there hasn’t been a commensurate improvement in services, like roads and other infrastructure.

However, opponents of the bill worry that eliminating income tax would leave the state with insufficient funding to fulfill its obligations. This concern is echoed by House Speaker Mark Eves, a Democrat, who stated that Maine’s tax system is broken and rigged for those at the very top. He believes that the Governor’s proposal would only make the situation worse.

The idea of eliminating income tax in Maine isn’t new. In 2015, then-Governor Paul LePage proposed amending the state’s constitution to permanently prohibit the Legislature from imposing income tax on any person, beginning in 2020. LePage’s two-year budget plan aimed to make up for lost revenues by increasing sales taxes, cutting off state revenue sharing with local municipalities, and taxing some non-profit groups.

However, LePage’s proposal was met with strong resistance from Democrats, who immediately rejected the idea. They instead offered a counter-proposal that would decrease but not eliminate income tax, lower property taxes, and keep sales tax unchanged.

If Maine were to enact the proposed bill and eliminate income tax, it would join the ranks of the 10 states that have partially or entirely abolished their income tax. Currently, seven states have no income tax, while New Hampshire and Tennessee tax only dividend and investment income.

As the bill’s future hangs in the balance, Boyer acknowledges that it’s unlikely to pass in its current form. However, he remains committed to fighting for tax breaks wherever possible, in the hopes of easing the financial burden on Maine’s large population of retirees living on fixed incomes and benefiting higher-income “job creators.”

Over the next 4-6 weeks, the bill is expected to reach the House floor, where its fate will be decided. In the meantime, the debate over the elimination of income tax in Maine continues to stir up strong opinions on both sides of the aisle. Whether the bill ultimately succeeds or fails, the conversation surrounding Maine’s tax system and potential reforms is unlikely to fade away anytime soon.