AUGUSTA — Legislative Democrats and Gov. Paul LePage reached a new impasse Wednesday, as Democratic leaders suggested suspending $400 million in Republican-backed income tax cuts as a solution to Maine’s next two-year budget.
Many Democrats voted for the cuts, which were part of the 2011 budget, yet they have long derided them, saying many benefit the rich and weren’t paid for.
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But removing the tax cuts from the next two-year budget puts the Democratic proposal on course for a veto by LePage, for whom the tax reduction was a major policy accomplishment.
“They know what’s in front of them,” said Adrienne Bennett, a LePage spokeswoman. “If they’re going to raise taxes, yes, they’re looking at a veto.”
LePage’s proposed budget for the next two years is seen by many legislators as unacceptable because it eliminates more than $200 million in state revenue sharing to cities and towns. Unless communities cut services, they would have to raise property taxes to offset the revenue loss.
LePage’s proposed budget for the next two years is seen by many legislators as unacceptable because it eliminates more than $200 million in state revenue sharing to cities and towns. Unless communities cut services, they would have to raise property taxes to offset the revenue loss.
But Republicans find suspension of the income tax cuts to be just as unpalatable as taking revenue sharing away from Maine communities.
At a news conference, House Speaker Mark Eves, D-North Berwick, and Senate President Justin Alfond, D-Portland, echoed arguments Democrats have made all session: eliminating revenue sharing in LePage’s budget will significantly raise property taxes.
Eves said delaying LePage’s income tax cuts “is the responsible option.”
“The governor’s budget is not balanced and it’s disingenuous for the governor to say that it is,” Alfond said. “It passes the buck and it unnecessarily burdens Maine’s municipalities.”
Property tax increases are likely if revenue sharing is eliminated. However, as Republicans often argue, they aren’t assured. Cities and towns could cut budgets to make up the difference. The Maine Municipal Association says LePage’s proposed budget, as a whole, shifts a $420 million burden to cities and towns. It says $284 million of that would be in revenue sharing.
“Democrats have already agreed to make painful cuts to programs that help the homeless and treat the mentally ill,” Eves said. “But we won’t be able to balance this budget on painful cuts alone.”
But Republicans panned the Democrats’ plan after the news conference, saying the majority party has made it clear that raising taxes is their only budget solution.
“We need to deliver the essential functions of state government, figure out what’s nonessential and make the cuts there,” said Senate Minority Leader Michael Thibodeau, R-Winterport. “This isn’t a revenue problem; this is a spending problem.”
LePage and Democrats have had a number of conflicts over the past two weeks. Last week, LePage, angry after the Senate leader of the Legislature’s Appropriations Committee refused his request to speak, accused Democrats of censorship and said state department heads wouldn’t be testifying before the committee anymore. The governor and Democrats also sparred about a television screen that was set up outside LePage’s State House office without approval from the legislative committee that oversees the building.
They’ve had major policy disagreements too: On Thursday, after LePage announced a veto of the Democrats’ plan to expand Medicaid while paying back Maine’s share of hospital debt, Eves said repeatedly that LePage has failed.
“Gov. LePage has failed to pay his bills,” Eves said. “He failed to provide health care to people whose lives are on the line. We urge Republicans not to join him in this failure.”
That cool atmosphere was illustrated Wednesday, when often-outspoken Assistant Senate Minority Leader Troy Jackson, D-Allagash, while walking up a set of stairs above where Senate Republican leaders were addressing reporters, shouted over the conversation.
He said on balance, LePage’s tax cuts and proposed revenue-sharing elimination is a shift in taxes from the wealthy to all property taxpayers.
“That’s all it is!” Jackson yelled.
LePage’s income tax cuts are a mixed bag. The changes did cut the top income tax bracket rate from 8.5 percent to 7.95 percent, but those paying 4.5 percent and 7 percent were moved to 6.5 percent. Also, 70,000 of Maine’s lowest-income people moved from a 2 percent rate to zero. On balance, Maine’s income tax cuts became more progressive percentage-wise, according to Maine Revenue Services data, meaning the rich shouldered more of the state’s tax burden after the changes than they did before, while paying less.
Little mentioned on Wednesday, however, were more compromise solutions to Maine’s budget problems.
A tax reform plan from the so-called Gang of 11 — a bipartisan group of legislators — for instance, would create a flat 4 percent income tax rate, broaden the sales tax base to almost all goods and services and provide property tax relief.
However, the plan from the group, led by independent Sen. Richard Woodbury of Yarmouth, a Harvard-educated economist, looks hard-pressed to pass. In a television appearance on Friday, Eves and House Minority Leader Kenneth Fredette, R-Newport, said they both opposed it.
Many Republicans like the income tax cuts in the proposal, but note that it raises $160 million more in annual tax revenue than the state currently takes in. LePage has said if the plan were revenue neutral, he could support it. Many Democrats think the tax changes in the plan, particularly the flat income tax and sales tax adjustments, are regressive.
Assistant Senate Minority Leader Roger Katz, R-Augusta, a leader of the Gang of 11, said he’s confident that the Legislature’s budget-writing committee can craft a “moderate, intelligent compromise on the budget by the end of June.” The next budget will take effect July 1.
“My personal hope is that the impasse where find ourselves creates an opening for the real kind of tax reform that some of us have been advocating for,” he said.
Michael Shepherd — 370-7652
mshepherd@mainetoday.com
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