6/22/99
murphy@cybertours.com
(Augusta) -- "Add back 25% of the amount you were allowed for a federal tax deduction." That will appear as a line item on 1999 tax forms for thousands of Maine's self-employed, a result of Democrats this Session taxing small business owners who provide health insurance for themselves and their families. House Republican Leader Thomas W. Murphy Jr (R-Kennebunk) said the Democrat tax increase was "absolutely unconscionable."
"There's very little Democrats do that surprises me anymore," said State Rep. Tom Murphy. "But this 11th hour shafting of small business owners is absolutely unconscionable. This tax did not have to happen and it should not have happened," Murphy said.
At issue is State tax conformity with current federal tax laws which increase the deduction for self-employed health insurance. Self-employed individuals can deduct a portion of the amount paid for health insurance for themselves, a spouse and dependents. In 1998 the deduction was 45%. 1999 federal law allows a 60% deduction.
This year when Democrat leaders were crafting the "new spending" Part 2 State Budget, they kept Maine out of conformity with federal tax laws, locking Maine's self-employed at last year's 45% deduction. Why? "It gave Democrats $1.3 million more for new and expanded social spending programs in the closing hours of the Legislature. It's that simple," explained Rep. Murphy.
Republicans and the Governor were outraged. Governor King submitted a bill (LD 2256) on Veto Day to reverse what Democrats had done. The bill sponsor was State Rep. Kenneth T. Gagnon, a Watervillle Democrat, who is House Chair of the Legislature's Taxation Committee. Instead of righting the wrong, Rep. Gagnon made it worse with a motion to send the bill to the Taxation Committee. With the Legislature not meeting again until next year, that means the loss of this health insurance deduction cannot be corrected before the State income tax forms are mailed out in December.
This action, according to the Maine Bureau of Revenue Services, means Maine's tax laws will be out of conformity with the feds for 1999, 2000, and 2001.
"The Governor's first mistake was giving this bill to a Democrat," said Rep. Tom Murphy. "I think the Governor knows that now." Murphy went on to say, "The number one problem facing small Maine business owners is the cost of health insurance. The number and percentage of working-age people in Maine without health insurance is rising. Federal tax conformity helps lower the cost of health insurance and makes it more accessible to more workers," Murphy said.
Who will be hurt by this tax increase? According to the Bureau of Revenue Services, self-employed persons with a mean annual income (Federal Adjusted Gross Income) of $50,000. "How many people does 19,200 returns represent? It could be as high as 96,000," said Rep. Murphy. "For what? Increased spending on existing services and programs was up 10% this year with $290 million used for new spending. That wasn't enough new spending for Democrats so they taxed Social Security and the health insurance deduction for Maine's self-employed.
"The next time Democrats claim to be taking the high road on the need for health insurance the overwhelming response from Maine's small business owners should be, 'Who are you kidding?'," said House Republican Leader Tom Murphy. Those 19,200 self-employed business owners -- your hairdresser, small retail shop owner on Main Street, child care provider, lobstermen, plumber, independent trucker, logger, small furniture manufacturer, farmers, mechanics -- are now going to be hit with a $1.3 million State income tax hike this year, Rep. Murphy concluded.
What's Your View?
Start or join a discussion on The Liars' Bench or email us