AUGUSTA – A joint panel of the Legislature’s budget-writing Appropriations Committee and revenue-raising Taxation Committee took hours of testimony Friday on parts of Gov. Paul LePage’s current budget proposal, which would revamp the state’s tax system.
LePage is hoping to offset or undo the impact of a voter-approved ballot question that would increase the state income tax on households earning more than $200,000 a year. The shift would push Maine’s top income tax rate to 10.15 percent, the second highest in the nation behind California, according to LePage’s finance commissioner, Richard Rosen, who presented the proposed tax changes to the joint committee.
Voters in November narrowly approved citizens initiative that adds a 3 percent surcharge on the state’s highest wage earners, with the new revenue being earmarked for public schools.
LePage is also hoping lawmakers will adopt his tax reforms, which would move Maine to a single flat income tax rate of 5.75 percent for all wage earners by 2020.
LePage’s plan is similar to earlier proposals and includes provisions to expand the Maine sales tax to a broader range of goods and services, most notably applying it to entertainment and recreational services that are exempt now, including movie and concert tickets, golfing greens fees and ski lift tickets.
LePage is also looking to eliminate the state’s estate tax and exempt the pensions of retirees from state income taxes.
Dozens of lobbyists, advocates for public schools and the poor, as well as citizens, turned out to offer their views Friday. Many said they were opposed to rolling back a decision by Maine voters and urged lawmakers to keep the new tax law in place. But several agreed with LePage, saying a top tax rate of 10.15 percent was making it hard to recruit and retain professionally trained workers such as doctors, dentists and engineers.
The hearing became heated at times and at one point the Senate chairman of the Appropriations Committee, James Hamper, R-Oxford, ejected one audience member from the room, saying he intended to maintain decorum.
During the exchange, Hamper accused University of Maine student Mary Manley of making a face after some audience members appeared to cheer and support statements by another witness who was urging lawmakers not to overturn the ballot question.
“Well, I could clear the room,” Hamper said as some audience members seemed to be laughing and cheering and at least one made a whistling noise. Hamper’s statement drew additional laughter and jeers. Then he stood and ordered Manley from the room.
“You out, go good-bye, see you later, not welcome here,” Hamper said. “I won’t take faces and I won’t take the comments back here, got it? You’re an example. Out.”
A visibly upset and crying Manley declined to speak to reporters immediately after the exchange, but others in the room sitting with her said they don’t believe she said or did anything wrong. They said they believed Hamper was making a joke, so that’s why some were laughing.
A Manchester resident, Manley had intended to testify against LePage’s tax proposals. Her written testimony, which was left for the committees, indicated she is a junior at the Orono campus. Upon leaving the hearing she told Hamper, “I am a student and I missed class today to come here.”
After the outburst, Hamper called a five-minute break before returning to take additional public testimony.
Earlier in the hearing, Rosen, the finance commissioner, made his presentation and took questions from the two committees for nearly two hours before members of the public offered their views.
Rosen said LePage’s proposal was meant to erase a long-failed tax system in Maine that is hurting the economy, holding back job growth, and keeping higher-wage earners from moving to the state and retirees from staying here.
“We are all familiar with the current tax system and its place as (an) impediment to our future economic growth,” Rosen said. “It is a system built on carve-outs and loopholes for special interests and is designed for an economic model that doesn’t have a future in the 21st century economy. It punishes the work of individuals, a lifetime of savings and a career of investment. It is unnecessarily complicated and extremely uncompetitive.”
LePage has previously tried to lower Maine’s income tax by broadening and increasing the sales tax. He has said his goal is to move the state toward eliminating the income tax completely, but lawmakers have largely rejected the move. In 2009 voters repealed a similar sales tax expansion with a so-called people’s veto.
LePage and others who support the move say expanding the sales tax would shift much of the state’s finances to the 40 million tourists who visit Maine each year. The governor’s proposal would also increase the sales tax on hotel and motel lodging, bumping it from 9 percent to 10 percent.
But those in the tourism trades said the shifts would make Maine less competitive with neighboring New England states. They suggested the changes would force small and family-owned tourism businesses to cut their own profits to keep prices competitive with the increased sales tax.
“We would be higher than New Hampshire, Vermont and Massachusetts, and Maine would have the third highest lodging tax rate in the United States,” said Chris Fogg, chief executive officer of the Maine Tourism Association.
The largest opposition to LePage’s efforts to undo the voter-approved ballot question comes from the Maine People’s Alliance, a progressive nonprofit group that advocates for the poor, and the Maine Education Association, the statewide teachers union.
Retired teacher MaryEllen Banton of Brunswick, who taught school for 38 years, said the Legislature for years had ignored the law to fully fund public schools and voters finally took matters into their own hands.
“I urge you to abide by the voice of the people who spoke by voting for Question 2,” Banton said. “While our governor and the Legislature drag their feet, withhold funds or just plain don’t fund – children’s lives are impacted.”
Both committees will continue their work on LePage’s tax and budget proposals in the weeks ahead. Under the Maine Constitution, the Legislature must enact a balanced budget by the end of the current fiscal year on June 30 in order to avoid a state government shutdown.
LePage, meanwhile, has been pitching his budget proposal and tax reform to citizens in a series of town hall meetings. The next is scheduled for Wednesday in Yarmouth.