A tax reform bill introduced Thursday by Gov. John Baldacci took just a few hours to do what took a similar bill several months.
A reform package championed by legislative Democrats since early in the session had awaited Baldacci’s signature since June 5, when the House and Senate enacted it mostly along party lines.
Instead of signing the bill, Baldacci proposed his own bill Thursday afternoon that echoed the previous version with a few differences. By 7 p.m., both the Senate and House had given it initial approval, putting it on track toward Baldacci’s signature. The final votes were 84-61 in the House and 20-13 in the Senate, with Republicans mostly in the opposition.
Sen. Peter Mills (R-Cornville) and Sen. Bill Diamond (D-Windham) were the only senators to break from their parties, essentially canceling out each other’s vote. In the House, no Republicans supported the measure while six Democrats voted against it.
“The governor made a better bill out of it,” said Sen. Joseph Perry (D-Bangor) the Senate chairman of the Legislature’s Taxation Committee. He added that tax reform in Maine isn’t over. “Two years from now we’ll be back at it to draw the income tax rate down another two percent.”
Republicans remained steadfast in their opposition of the bill, repeating familiar arguments about how the bill creates a new legion of sales tax collectors out of business owners across the state. They also took issue with the fact that they were being asked to vote on a bill that they received minutes before.
“I have had longer to read a greeting card than this 34-page document,” said Sen. David Trahan (R-Waldoboro) of the bill. “I believe this sets a new record. I don’t like this kind of process.”
Senate Majority Leader Philip Bartlett (D-Gorham) responded that work on the core provisions of the bill goes back years.
“Every member of this body has a copy of this bill,” said Bartlett. “The summary is in the back. Anyone who is concerned with something can easily flip to the appropriate section.”
Sen. Stan Gerzofsky (D-Brunswick) said lowering the income tax rate will draw businesses into the state, particularly to Brunswick Naval Air Station, which is scheduled for closure in 2011.
“This is the biggest thing the state of Maine could do to help redevelop that base is decrease the income tax rate,” said Gerzofsky.
Steve Levesque, executive director of the Midcoast Regional Redevelopment Authority, the body trying to lure economic development to the base, watched the debate from the audience. He agreed with Gerzofsky’s assessment.
“(Maine’s income tax rate) comes up all the time,” said Levesque. “Bringing it down two percent is huge.”
In addition to lowering the state’s top income tax rate from 8.5 percent to 6.5 percent and generally broadening the sales tax base in a range of areas – both of which were concepts from the previous version – Baldacci’s bill does the following:
Enacts a surcharge equal to 0.35 percent on an individual’s taxable income, effective Jan. 1, 2010;
– Eliminates the Maine minimum tax credit for individuals, beginning in January 2010;
– Makes the earned income tax credit refundable up to $150 for married couples and $125 for individuals;
– Eliminates an increase in the real estate transfer tax, which was proposed in the previous tax reform bill;
– Eliminates a sales tax proposed in the previous legislation on businesses that make snow for winter sports;
– Specifies that businesses that promote health and physical fitness, such as gyms and skating rinks, are exempt from sales taxes;
– Increases allocations to the Maine Tourism Marketing Promotion Fund.
Rep. Thomas Watson (D-Bath) House chairman of the taxation committee, said even skeptical Mainers will eventually recognize the merits of the law.
“Perhaps before, but certainly when the economic recovery begins, the state will see and enjoy the benefits of this bill in increasing economic development and stabilizing the volatility of the tax base,” he said. “Starting Jan. 1, 2010, they’ll see an increase in their paychecks.”
House Majority Leader John Piotti (D-Unity) who sponsored the original tax reform bill and has taken the lead on promoting it, agreed.
“I think the arguments against us doing this are going to ring hollow,” he said. “States around this nation right now are raising taxes to balance their budgets. Maine is implementing tax reform to put more money in Mainers’ pockets.”
House Minority Leader Joshua Tardy (R-Newport) said enacting the governor’s bill was a mistake.
“This is going to be bad for the Maine economy,” he said. “There are going to be at least 103,000 people hurt by this.”
Baldacci, who is expected to sign the bill today, said it reflects the core principles he has supported throughout the debate.
“We are significantly improving our tax system,” he said in a prepared statement. “This is an important accomplishment for Maine that will strengthen our economy and reduce the overall tax burden on our people.”
