AUGUSTA — A majority of the Legislature’s Taxation Committee voted Wednesday to reject Gov. Paul LePage’s plan to eliminate Maine’s income tax, citing a projected $1.8 billion loss in state revenue and no plan to offset it.
The 7-5 vote broke mostly on party lines, with all six Democrats and one independent voting to reject the governor’s plan to amend the Maine Constitution and abolish the income tax by 2020. All five Republicans present voted for the measure, arguing that it would spark business investment and lift Maine out of the economic doldrums.
Republicans have rallied behind the proposal, L.D. 1367, even as few of them have embraced LePage’s separate plan to incrementally lower the income tax from 7.95 percent to 5.75 percent and partially pay for the reduction with increases in the sales tax. Republicans’ support for the elimination of the tax with no corresponding spending cuts or additional taxes has drawn a chilly response from Democrats, who say the proposal may be politically popular but is ultimately irresponsible.
Some questioned why the governor didn’t propose eliminating the income tax in his two-year budget, rather than submit a plan for incremental reductions that Republicans have so far failed to support.
“I feel like we’re not being given the full story on what would happen if this would pass,” said Rep. Adam Goode, D-Bangor. “It’s a giant amount of money and there’s been no explanation as to what would be cut if that would pass. As legislators, I think it’s our responsibility for people to know what they’re voting on.”
Republicans on the committee said the proposal is worth the risk.
“I believe we need to do something bold. I believe there will be increased business activity if we do this,” said Sen. Paul Davis, R-Sangerville.
The committee vote likely dooms the proposal, but it will probably produce pitched floor debates in the Democrat-controlled House and Republican-controlled Senate. Because the proposal seeks to amend the Constitution, a two-thirds vote is required in each chamber before the measure would go to voters for final ratification. While prospects for approval are slim, Republicans and LePage appear confident that the bid to eliminate the income tax can be used in the 2016 election.
Democrats and progressive groups quickly hailed the committee vote, framing the income tax cut as a mortal threat to public education funding.
“We could eliminate all state funding for K-12 and higher education and still not realize the savings needed to pay for this fiscally irresponsible proposal,” said Garrett Martin, director of the Maine Center for Economic Policy, a progressive advocacy group. “We would have to increase local property taxes by 40 percent to maintain current spending for schools. Doubling the current sales tax rate still would not generate the revenue needed to balance the state’s budget.”
Republicans on the committee were not sold on the idea that abolishing the income tax would have such dire consequences.
“We will figure out how to make this work. It’s our responsibility to find a way to make this work,” said Rep. Paul Chase, R-Durham, adding that it would be irresponsible not to give voters the opportunity to vote on the proposal.
Rep. Gary Sukeforth, an independent from Appleton, said he was open to the concept, but needed more information from the LePage administration.
“I don’t need a detailed budget … but I need to see an outline or something on how this is going to work, not just a sound bite,” he said. “Politically this is great. Who doesn’t want to get rid of the income tax? But I can’t in good conscience say, ‘Let’s vote for it and things will happen.’ ”
He added, “Why doesn’t the governor propose a budget with a zero income tax if it’s such a good idea? I haven’t had an answer to that.”
Sen. Earle McCormick, R-West Gardiner, attempted to answer Sukeforth’s question. In doing so, he referenced the uncertain fate of the governor’s tax overhaul, a proposal that has dominated the legislative session but appears doomed.
“I’m not sure, but part of the answer may be that we can’t even pass his proposal to peck away at the income tax,” McCormick said.
Steve Mistler can be contacted at 620-7016 or at:
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