What to know about Maine's revenue shortfall:
State of Maine
Addressing Maine's Revenue Shortfall
What are the main causes of the current revenue shortfall?
The economic fallout brought on by the coronavirus has been the major cause of Maine’s current revenue shortfall. Business closures, limited tourism, and major revenue declines across the state and local governments all directly stem from the impact of this virus.
Other contributing factors include tax cuts for the wealthiest Mainers and corporations that were provided during Governor Paul LePage’s administration.
During Gov. LePage’s tenure, the threshold for the estate tax was raised to $5.6 million for individuals and $11.2 million for married couples. Meanwhile, working Mainers endured an 18 percent increase in their property taxes. LePage also made significant income tax cuts, favoring the wealthiest Mainers and putting a significantly higher tax burden on working families.
Big corporations also got a major break in their taxes. Many are allowed to hide profits overseas to avoid fair taxation, and others are using the dark store theory to challenge Maine towns to lower their property taxes by valuing their property based on empty storefronts in the area. These tactics allow them to avoid paying their fair share for the use of our roads, our workers and our resources.
Maine’s economic growth was stalled due to LePage’s tax breaks for the wealthy, and this led to further damage to revenue streams when COVID-19 hit.
What is the best way to address Maine’s revenue shortfall?
In the short term, Maine’s Department of Department of Administrative and Financial Services proposed a three part plan, which includes $255.6 million in departmental "cost savings and efficiencies" that would avoid any major program cuts or layoffs, allocating $96.7 million in federal funding from the CARES Act Coronavirus Relief Funds for authorized public health and safety costs, and transferring approximately $70 million in liquor sales tax receipts. But state officials and economy experts say more federal aid is needed to help us in our immediate recovery.
In the long term, Maine needs to look at multiple options in addressing this shortfall and preventing further catastrophe. Those options should include increasing revenue by balancing the tax burden between working Mainers and wealthy Mainers, and between small businesses and corporations; closing tax loopholes, which could generate more than $5 million; and by ensuring continued access to essential services like education, infrastructure and healthcare.
Maine's Income Tax Brackets
In Maine, a nurse who makes $55,000 a year working in the emergency room of a hospital pays the same percentage in income tax per year as the CEO of that same hospital.
This is thanks to Gov. LePage’s elimination of the higher income tax brackets, which has put a higher tax burden on our working families.
Here are Maine's current income tax brackets:
Maine - Single Tax Brackets
Maine - Married Tax Brackets
What should Maine avoid when addressing the revenue shortfall?
Between tax cuts for the wealthy, increasing Maine property taxes, and cuts to essential services, there are a lot of choices Maine could make that provide a mirage of immediate relief, but that damage our recovery in the long run.
Cutting education spending:
Cuts to education could have a ripple effect, hurting our economy for years to come. The National Education Association projects as many as 1.9 million people in K-12 and higher education could lose their jobs without federal intervention. Major layoffs would likely mean a slower overall recovery, since workers without jobs can’t participate in the economy. Schools also provide working families with childcare for most of the workday. Already, this new hybrid model of online and in-person work, combined with limited child care options due to the virus, has put strain on many families. Further education cuts could force more parents to stay home. This economic impact would be catastrophic: working families’ income would drop, and spending would decrease.
Raising property taxes:
We’re not going to help hardworking families get back on their feet after the economic earthquake of COVID-19 by cranking up their property taxes. Mainers with lower incomes pay a higher percentage of their income to property taxes than the wealthiest few. By further hiking up these property taxes, working families could face the loss of their homes, damaging not just our economy but the lives of so many Mainers.
Raising the sales tax:
Higher sales taxes burden small businesses and working families more than the wealthiest Mainers. They have the potential to reduce what people spend in local small businesses, which hurts our economic recovery and will slow job growth. Working families are also forced to pay a higher percentage of their income on sales taxes than the very wealthy. In the long term, sales tax revenue also grows more slowly than other forms of state taxes. By relying primarily on sales tax, this could hurt Maine’s ability to fund critical essential services.
Between high property taxes and corporate tax loopholes, Maine's tax code hurts working families and small businesses, while benefitting the wealthiest few.
Join our efforts for tax fairness in Maine. Ask your elected officials to close corporate tax loopholes and to prevent major hikes in property taxes.