AUGUSTA — A bill initiated by a state senator who wants to raise Maine’s tax on earned income over $250,000 a year will go forward, but without the assistance of his Republican colleagues in the House of Representatives.
Sen. Tom Saviello, R-Wilton, said Thursday that he had found the required House sponsor for his bill to raise the tax on high earners from 7.95 percent to 8.5 percent. However, House Republican leader Rep. Kenneth Fredette, R-Newport, said no one in the caucus could support the measure right now.
Instead, Rep. Terry Hayes, D-Buckfield, will co-sponsor the bill. Saviello needed a House member to introduce the measure because the Maine Constitution says all bills raising revenue must originate in that chamber.
House Republicans’ decision to spurn the bill signals that Republican lawmakers are either digging in to defend the tax cut plan the Legislature passed in 2011, or using it to strengthen their bargaining position in the upcoming budget negotiations. Democrats control the House and Senate.
Gov. Paul LePage’s $6.2 billion budget is designed to protect the tax cut package, which he says is important to preserve since Congress let a temporary federal payroll tax cut expire as part of the fiscal cliff agreement.
The higher rate was in effect until 2011, when the Legislature approved a budget from LePage that reduced the rate on top earners from 8.5 percent to its present level of 7.95 percent. Saviello’s plan would restore the top rate to 8.5 percent for earning of more than $250,000 a year.
Michael Allen, LePage’s associate commissioner of tax policy, said the change would affect 4,100 Mainers and generate $5 million a year.
Saviello said he submitted the bill because his constituents had questioned why higher earners couldn’t pay more in taxes.
The rate would apply only to income from wages and salaries, not from dividends, business, rentals or other sources.
Saviello had hoped to obtain the support of Rep. L. Gary Knight, R-Livermore Falls. Saviello said Thursday morning that he was unable to do that.
Fredette, the House Republican leader, said he had discussed the proposal with Knight Thursday morning.
“We had a conversation with the alleged co-sponsor (Knight),” Fredette said. “We decided that it wasn’t something we can support right now.”
Knight told the Portland Press Herald Wednesday that he supports the 2011 tax cuts and would prefer to see taxes go down for everyone, but that he hopes Saviello’s proposal can bridge gaps between Republicans and Democrats.
Knight said Thursday that he withdrew his support after learning that the number of affected taxpayers was higher than originally told to him by Maine Revenue Services. The lower number is not expected to change the $5 million impact, meaning the impact would be spread among more taxpayers.
Still, Knight said Thursday that he didn’t want to hurt the tax plan he helped pass in 2011. He said that party leaders did not pressure him to change his mind.
“There was no pressure to change my position,” he said.
Maine Revenue Service has estimated that the tax cuts reduced the tax burden for the top 10 percent of Maine earners – more than 67,500 families making around $119,000 or more – by more than $63 million a year. Saviello’s plan would cut into that amount.
The cuts also eliminated taxes for 70,000 low-income Mainers, by moving a 2 percent tax rate to zero. The top 10 percent of income earners paid more as a percentage of Maine’s overall tax burden after the changes.
Saviello, who left the Democratic Party in 2005, is considered a moderate Republican. He has clashed with his party and LePage on occasion.
“The governor has challenged us to find alternatives to some of the things he passed in his budget,” Saviello said Thursday. “That’s what this is.”
Saviello said he hopes his proposal would spare other cuts in the governor’s budget, specifically LePage’s proposal to eliminate the state’s drug program for the elderly. He said he was willing to support other welfare cuts and the governor’s proposal to save $14 million by making school districts contribute to the cost of the teachers retirement fund.
Saviello’s proposal had received a tepid reception from Republican leaders, who need to align with the governor to increase their negotiating power on the budget. Democrats have the majority, but they’ll need to draw Republican lawmakers to their side if they want to have enough votes to override LePage’s veto power.
Democratic leaders had embraced Saviello’s plan, but have been vague about their proposals to deal with taxes.
According to the nonpartisan Tax Foundation, Mainers paid an average of 10.3 percent of income in taxes in 2010.