AUGUSTA — If policymakers want to spur opportunity, shared prosperity and growth through the tax code, they must put working families and Maine communities first. The earned income tax credit and property tax fairness credit are a good place to start.
Tax breaks for the wealthy and corporations deliver windfalls for the top but drain public resources – making it harder to fund public investments that benefit everyone. That’s the bad trade-off in the law pushed through by President Trump and congressional Republicans in December, which blew a trillion-dollar hole in the federal budget with new giveaways to corporations, wealthy households and foreign investors.
Policymakers in Maine have been debating how to respond. But the Legislature left the question of “tax conformity” – the state’s response to the federal tax changes – unanswered when it sailed past its April 18 deadline to finish its work. Now it’s unclear whether the issue will come up for a vote this year at all.
Maine House Minority Leader Ken Fredette has said that tax conformity must be passed this year to avoid tax increases on Mainers.
That’s not true. The tax code is like any other law – it changes when lawmakers, or the public through referendum, act to change it. Lawmakers should try to agree on a tax plan that works for working families this year but if they can’t, they can try again next year. In the meantime, nobody’s tax obligation will change: Deductions, credits and exemptions all stay the same.
It’s more important to get conformity right than it is to do it soon. Whenever it is, the same questions must be asked of a conformity proposal as any tax bill: Does it support economic growth for all Mainers, or just a select few? Does it create opportunity, or squander it by wasting resources necessary to fund critical public needs?
Gov. LePage has a tax conformity plan that doubles down on President Trump’s tax breaks, enshrining those same giveaways in Maine’s tax code. His plan lowers taxes for the wealthiest estates and largest corporations, spending tens of millions of dollars on the same people and businesses already expected to come out on top from the federal tax overhaul.
Democrats have proposed a better plan, rejecting tax breaks for the top and focusing on working families and seniors. Their plan would triple the Maine earned income tax credit, giving a boost to individual families and Maine’s economy. It also expands the property tax fairness credit, which helps homeowners and renters, especially seniors, stay in their homes.
When working people can afford to keep up with basic spending, it doesn’t just help them – it helps all of us. Maine’s earned income tax credit supports working people by boosting tax refunds. That extra money is spent in communities right away to pay down bills, make a big purchase or otherwise provide for their families. That spending stimulates the economy. That’s why Moody’s assumes that help for low- and middle-income families offers more bang for their buck than tax breaks for corporations and wealthy households.
Among the states with earned income tax credits, Maine’s is third-smallest. Tripling it would bring Maine in line with the rest of the country and help roughly 102,000 Maine families, according to an independent, nonpartisan National Conference of State Legislatures analysis.
The Democratic plan would expand property tax relief by boosting the refundable property tax fairness credit. Underfunding of state support for local services, caused in part by previous rounds of tax cuts, has pressured towns to raise property taxes. With home values rising twice as fast as wages, property-tax bills are growing too fast to keep up. Greater property-tax relief will help low- and middle-income Mainers, as well as those on fixed incomes, stay in their homes. The Democratic proposal increases the maximum credit for Mainers under 65 years old from $600 to $750 and increases the maximum credit for seniors from $900 to $1,000. It also extends the credit to more households and creates a minimum credit of $400 for low-income senior citizens.
Sixty percent of Maine households earn less than $61,000 a year. An analysis by the Institute on Taxation and Economic Policy shows those Mainers, a majority of the state, would fare better under the Democrats’ plan than under Gov. LePage’s, yet their plan costs $30 million less than LePage’s this budget cycle.
The expansion of the earned income tax credit and property-tax relief will do more good for more Mainers than tax breaks for the top. They should be the model for any tax conformity deal – whether this year or next.
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