AUGUSTA – The Legislature’s House Democratic leader is proposing a bill he says will create “tax fairness” between Maine’s high earners and everyone else, a proposal that aligns with a national effort among Democrats to fill budget gaps by raising taxes on the wealthy.
Rep. Seth Berry, D-Bowdoinham, says his proposal, L.D. 1113, would fill half of the projected $400 million gap in the next two-year budget — a shortfall attributed to a tax-cut package passed by the Legislature in 2011, when Republicans held the majority.
Berry’s bill is short on details. He has submitted the concept but not the actual language to the Legislature, and he would only say Thursday that the bill will address sales, property and income taxes to produce “an equalized tax rate” for Mainers.
If enacted, Berry’s proposal would impose a tax-equalization assessment on Maine residents who make $250,000 or more if the effective rate they pay in income, sales, use and local property taxes falls below a state average determined by Maine Revenue Services.
Mainers currently pay 11 percent, on average, of their incomes in state and local taxes, but the state’s highest earners pay an average of 10 percent, according to data cited in a release by House Democrats.
Berry’s so-called Buffett Rule bill would ensure that the state’s highest earners pay at least the state average of 11 percent. Conversely, income tax filers who make less than $125,000 and pay more than 11 percent in state and local taxes would qualify for a tax-equalization credit.
The measure reflects a growing trend.
Over the past year, Oregon, California, Hawaii, New Jersey and North Carolina have raised tax rates on wealthy residents to increase revenues amid the slow economic recovery.
Earlier this week, the New York Legislature forged a budget deal with Gov. Andrew Cuomo that would raise taxes, at least temporarily, on individuals earning seven figures while giving a tax credit to middle-income earners and providing additional tax breaks for businesses.
Berry’s bill, while similar in concept to proposals in other states, is more comprehensive.
In a statement, Berry said his bill would generate $200 million in state tax revenues in the first two-year budget cycle.
According to Maine Revenue Services, there were 7,388 resident returns with a Maine adjusted gross income of at least $250,000 in 2011, the most recent tax year. Those earners accounted for 1.2 percent of all tax filers that year.
Those same tax families paid the state $267.8 million in income taxes, accounting for 21 percent of the state’s income tax revenues.
According to a 2011 study by Maine Revenue Services, 43 percent of all tax collections in Maine were property taxes. That same study showed that homeowners earning $12,167 or less spent the highest percentage of personal income on property taxes, 30.6 percent. Homeowners earning over $108,724 spent 2.5 percent of their incomes on property taxes.
The same study showed that low-income earners spent the highest percent of their income on sales taxes. Residents earning $12,167 or less paid 3.7 percent to sales taxes, while those earning over $108,724 paid 1.3 percent of their income.
Berry said his bill would address the disparity of all taxes.
“We’re going big, looking at the whole picture,” he said Thursday.
The proposal has been foreshadowed for the last month by organizations claiming that the tax cuts passed in 2011 skewed toward the state’s wealthy. The public relations effort, spearheaded by the Maine People’s Alliance, is overseen by the national group Americans for Tax Fairness.
That group, co-chaired by Neena Tanden, a former member of the Obama and Clinton administrations, boasts partners in nearly 20 states, including Maine.
Berry’s bill is at least a partial response to Gov. Paul LePage’s two-year budget proposal, which retains the 2011 tax cut package with an array of cuts in services and a two-year suspension of municipal aid.
The municipal aid suspension, along with other proposals, has encountered fierce resistance from towns and cities.
Berry said in a statement that the present tax code puts too much of a burden on middle- and lower-income taxpayers, compared to higher-income taxpayers.
But that appraisal was challenged by Republicans who say Democratic leaders are going to raise taxes at a time when Mainers can’t afford it.
The House Republican Office cited recent calculations by Maine Revenue Services that said rolling back a .55 percent income tax cut that the Legislature approved for high-income earners in 2011 would generate only $10 million for the next two-year state budget.
Additionally, Republicans argued that Democrats had historically adjusted the tax code so that middle-class earners were shoved into the top tax bracket.
“I’m also a supporter of tax fairness, but Democrats over the years have taxed all Mainers like they’re rich,” said Rep. Kenneth Fredette, R-Newport.
“Instead of chasing away the last of the rich people in Maine with higher taxes, we should reduce the tax burden on the middle class and put them in the middle tax bracket where they belong, not the highest.”
Berry’s bill carries the full weight of the Democratic leadership, including House Speaker Mark Eves of North Berwick and Senate President Justin Alfond of Portland.
“Here we have the opportunity to pay our bills for past tax cuts, implement fairer taxes and cut taxes for most Maine families — in many cases by half,” said Assistant House Majority Leader Jeff McCabe of Skowhegan, one of the bill’s co-sponsors.
* – This story has been corrected to properly classify the number of resident returns for those earning $250,000 or more in 2011.
Steve Mistler can be contacted at 620-7016 or at: