Sen Deb Plowman: Major Tax Reforms Passed, 125th Legislature
Senator Debra Plowman
September 12, 2012
Earlier, I promised to provide some addition information on some of the major reforms that we passed during the 125th Legislature. In this issue, I want to inform you of tax reforms we have made on your behalf.
Please don't hesitate to contact me regarding other pieces of legislation that we considered.
I am honored to represent you in the Maine Senate.
Senator Debra Plowman
Senator Debra Plowman is the Assistant Majority Leader in the Maine State Senate. She is a member of both the Veterans and Legal Affairs Committee and the Joint Rules Committee. She represents District 33, which includes the Penobscot County communities of Carmel, Charleston, Corinna, Corinth, Dexter, Dixmont, Etna, Exeter, Garland, Glenburn, Hampden, Kenduskeag, Levant, Newburgh, Newport,: Plymouth, and Stetson.
1st Regular Session:
Taxpayers to Receive Largest Tax Cut in Maine History
The State Budget (LD 1043, PL 380) that passed in the Senate 29-5 (Roll Call #265) and in the House 123-19 (Roll Call #201) contained $150 million in targeted tax relief (the largest tax decrease in Maine history). This was adopted to spur economic growth and job creation. When fully implemented, it is designed reduce unemployment and provide tax relief to working families. To give relief to low-income filers, it will eliminate 70,000 filers from state income tax liability entirely. A Maine family of four will be able to earn up to $35,750 before paying any income taxes, up from $21,400 under current law.
It moves state tax policy in the direction of greater fairness, targeted investment, and simplicity. It does so by reducing the numbers of tax brackets; reducing the top marginal tax rate from 8.5% to 7.95%; and conforming to federal standards for personal exemption and married filing jointly. According to Maine Revenue Services (MRS), the wealthiest 10% of Maine taxpayers pay 55.8% of Maine income taxes. Because they only receive 43.7% of the tax cut, they will pay 57.3% of income taxes collected once the cuts are fully implemented. MRS continues, "We estimate that the lower deciles, (lower and middle classes) will get a bigger reduction in income tax liability (in percentage terms) than taxpayers in the upper deciles."
It targets job creation and retention by providing several tax credits and exemptions for businesses. Beacon Hill Institute at Suffolk University has estimated that by 2015, the income tax cuts adopted will generate 3,741 new private sector jobs.
2nd Regular Session:
Legislature Sets Policy Goal for When Times Improve and Enacts Taxpayer Protections
Legislature sets goal of returning excess revenues to taxpayers when economy improves (LD 849)
The Legislature enacted forward-looking legislation that will return excess tax revenues to taxpayers when the economy improves. LD 849 sets a goal of gradually reducing income tax rates to 4% when budget surpluses return. It is only triggered when the economy improves, and there are extra revenues over and above the budgeted needs of state government. Extra revenues above a statutory spending cap set under the Baldacci administration will go into a fund that is used to gradually reduce the highest income tax rates gradually until the maximum rate is 4 percent.
Providing a specific goal helps ensure that future legislatures remain committed to returning excess money to taxpayers rather than create new programs when good times return. It is responsible because it only occurs when there are surplus revenues above and beyond the needs of state government to fund existing commitments, including property tax relief, and Maine's rainy day fund. Lowering income tax rates further will help reverse the outmigration of young people and retirees to other states and help create jobs here in Maine.
Maine Revenue Services Reform - LD 1750
Last year, reforms were made to the tax appeals process at Maine Revenue Services (MRS) to create a fairer system for Maine taxpayers. The MRS appeals office was repealed and replaced with an appeals office independent of MRS. Additionally, the Maine Taxpayer Advocate office was established to investigate complaints about MRS made by taxpayers - the office would report any reoccurring problems with the tax collecting agency to the Legislature and Governor.
This year, the Legislature built upon those reforms. The independent appeals office has been turned into the Maine Board of Tax Appeals, a three-member board appointed by the governor, instead of a single appointee of the Commissioner of Administrative and Financial Services Department. Additionally, when a decision of the Board is appealed to the Superior Court, the Court is required to conduct a "blank slate" review, without deference to the Board's decision. A number of technical changes were also made to improve the clarity and transparency in the appeals process.