AUGUSTA — A series of bills that would undo a voter-approved 3 percent surcharge on Maine household incomes over $200,000 were the subject of hours of testimony Monday before the Legislature’s Taxation Committee.
The money raised from the surcharge, estimated to be about $124 million in 2017, was earmarked for public education in the citizens initiative approved by a narrow margin last November.
The revenue will go into a designated fund, which will be used to meet the state’s requirement to provide 55 percent of school funding if the state’s General Fund appropriation falls short. Any money from the fund must be used for “direct support,” such as teachers’ salaries, not for administration.
The office of Gov. Paul LePage, who has opposed the surcharge, released an 11-page analysis on its impact Monday, suggesting it would cost the state thousands of jobs and would also contribute to as many as 1,400 people leaving the state. The surcharge would also affect the state’s gross domestic product by as much as a negative $160 million, the analysis said.
“Regrettably, we will witness these effects through reductions in employment, population, gross domestic product, and income at a time when Maine has seen improvement in all of these areas,” Jonathan LaBonte, the director of the Governor’s Office of Policy Management, said.
At least four Republican-sponsored bills are in the works that would reverse the ballot measure, while another would send the question back to voters for reconsideration.
Rep. Heather Sirocki, R-Scarborough, said she has talked with dozens of voters who have “buyer’s remorse” over their previous votes.
“It would be the very same question but giving voters a little more time to understand this,” Sirocki said of the latter bill.
Democrats on the committee said voters knew what they were voting for.
“Mainers didn’t approve Question 2 with fog in their eyes,” Sen. Troy Jackson, D-Allagash, said in opposition to all of the bills. “More people voted for Question 2 than voted for either of the presidential candidates and I think their vote should mean something.”
Jackson, the Senate minority leader, said rolling back the ballot question ultimately would be just another tax cut for the wealthy that would put more pressure on local property tax payers. “We need to be honest about what these bills are, which is nothing more than an attempt to roll back and give a tax break to the wealthiest in the state of Maine,” he said.
The hearings drew a large group of people who wanted to testify. About 80 individuals signed in to speak on the bills.
Those for and against the bills waited hours to offer their three minutes of testimony on the proposed legislation.
Robert Sansone, the chief human resources officer for Tyler Technologies, told the committee that raising Maine’s top marginal tax rate from 7.15 percent to 10.15 percent would lead to companies like his – with workers in different states – deciding not to locate their top executives in Maine, as is now the case. A software company, Tyler Technologies is based in Plano, Texas, a state with no personal income tax, but it employs more than 600 people in Maine, with a division headquarters in Yarmouth. Sansone said Maine offers “a well-balanced work force with a strong work ethic and provides a beautiful environment in which to live.”
Still, Sansone said Maine is geographically remote and has a less friendly business climate than other states Tyler operates in. He said the new surcharge was making recruiting top talent more difficult.
“If the new tax rate remains in place, it would be very clear that Maine is not a state that you would choose to operate or grow a business,” Sansone said. “It’s not about 3 percent – it’s about 10 percent.”
Other Maine executives also weighed in against the surcharge. Greg Wiesnner, a vice president and corporate counsel for WEX Inc., which employs about 750 workers at its South Portland headquarters, said the higher tax rate would hurt the state’s economy. He said WEX was working to attract talented young workers – something that is already a challenge with Maine’s demographics as the state with the oldest median age in the nation.
“This is not a message that is going to attract people,” Wiesnner said.
He said he wasn’t sure how many of WEX’s employees would be affected by the new surcharge because the company doesn’t ask workers to disclose how much money their spouses make and the $200,000 threshold applies to household incomes. But Wiesnner said the surcharge certainly becomes an issue as employees move up the career chain in the company.
Both he and Sansone said the fact that Maine companies oppose the surcharge doesn’t mean they don’t support education. Both detailed the various ways their companies support education, including higher education, in Maine.
But opponents of the bills said the surcharge was approved by voters because the Legislature has consistently failed to provide local schools with a 55 percent state share in education funding, which was also passed as a ballot question in 2004.
Scott Cuddy, an electrician from Winterport and member of the RSU 22 School Board, said the new surcharge was the best chance in the last decade the state has had to reach the 55 percent funding level. Cuddy said doing otherwise would simply continue to push education costs onto local property taxpayers.
“Two referendums dealing with the same issue,” Cuddy noted.
He said he raised the point because both ballot measures sent a clear message to the Legislature. “It is rare, I think, that state lawmakers or federal lawmakers get such a clear and concise message from their constituents as to what they want,” Cuddy said.
It is uncommon for the Legislature to overturn a law approved by voters at the ballot box. The last time the Legislature took that step was more than 35 years ago, when it only partially overturned a ballot question that eliminated indexing the state’s income tax to inflation by changing the year the law would go into effect. That change actually created a one-time surcharge for income tax payers because it relieved the state from having to provide about $32 million in tax rebates.
In the days ahead the committee will continue to work on the bills and may change them with amendments before voting on a recommendation to the full Legislature to either support or oppose the legislation.
Scott Thistle can be contacted at 791-6330 or at: