AUGUSTA — Gov. Paul LePage urged lawmakers Monday to “do no harm” to the state’s elderly or the Maine economy as he introduced a two-year budget proposal he said aims to “shield the vulnerable.”

But municipal officials later warned that LePage’s proposals to change revenue sharing and a popular tax exemption will only end up costing many homeowners.

Previewing topics he is likely to hit during Tuesday night’s State of the State address, LePage laid out his arguments for income tax cuts, education funding changes and other major policy shifts to the legislative committee charged with crafting a new budget. But LePage also repeated his contention that voters approved a minimum wage hike and a 3 percent tax surcharge on wealthy Mainers without knowing the impacts on the state’s economy.

“Wealthy out-of-state unions and special interests poured millions of dollars into Maine to hijack our referendum process. In fact, they have virtually made you all irrelevant,” LePage told members of the Legislature’s Appropriations and Financial Affairs Committee. “They could reverse all of the progress we have made in the past. The Legislature is now on its heels and some would say we don’t need you anymore.”

LePage said he disagreed, however, and that his budget seeks to reduce potential impacts on the state’s economy.

The governor’s budget proposal – which is likely to be substantially rewritten by the Legislature – proposes to increase the Property Tax Fairness Credit for Mainers who are over age 65 or low-income. The budget also aims to earmark more Medicaid funds to the elderly or disabled but does so in a controversial way by kicking thousands of able-bodied adults with children out of MaineCare, which is the state’s Medicaid program.

Wealthier Mainers and business owners would also benefit from LePage’s budget proposal, however.

In November, voters approved a 3 percent tax surcharge on Mainers earning more than $200,000 a year to provide more money for public education. LePage’s tax proposal would nullify the 3 percent surcharge by setting Maine’s top tax rate at 7.15 percent this year (instead of 10.15 percent under Question 2 on the November ballot) while leaving the lowest rate steady at 5.8 percent. By 2020, all taxpayers would pay a flat tax of 5.75 percent.

LePage also wants to eliminate the estate tax on inheritances over $5 million.

The Republican governor has been highly critical of voters’ approval of the Question 4 ballot initiative that increased Maine’s minimum wage from $7.50 to $9 last month and provides additional, annual increases until the wage hits $12 an hour in 2020. He wants lawmakers to reinstate the minimum wage “tip credit” for tipped restaurant employees and eliminate the annual indexing of the minimum wage after 2020.

“Mainers voted on questions 2 and 4 with no idea how destructive this would be to our economy,” LePage said.

Potential changes to the minimum wage law will be considered as part of separate bills. But aspects of LePage’s two-year budget were already encountering push-back Monday.

Representatives from Bangor, Lewiston and the Maine Municipal Association criticized LePage’s proposal to freeze “revenue sharing” – the slice of sales and income tax dollars sent back to towns and cities – at the current level of 2 percent. The original law directed 5 percent to municipalities as a way to limit pressure on property taxes.

Bangor assessor Philip Drew said the average residential property tax in Bangor would decrease from $2,925 to $2,762 if revenue sharing was maintained at 5 percent rather than 2 percent. Additionally, Drew said another LePage proposal to limit the Homestead Exemption tax relief program to homeowners over age 65 would affect roughly 4,000 Bangor households who would no longer qualify. That would represent a 10 percent property tax increase for homeowners under age 65, who account for the majority of Bangor’s residential taxpayers.

“They will shoulder the burden of this increase, which results in another tax shift, but this time based upon age,” Drew said. “Income levels tend to rise as we get older and the loss of this exemption will hit our youngest homeowners hardest, and those are the residents we are hoping to attract.”

Kate Dufour of the Maine Municipal Association, which represents municipal officials in Augusta, said LePage’s revenue-sharing proposal “unravels a promise” by lawmakers to municipalities when they set the reimbursement rate at 2 percent in the last budget. The difference between 2 percent and 5 percent is roughly $100 million, Dufour said, and that puts pressure on municipal property taxes.

Tuesday night, LePage is scheduled to deliver his first State of the State address to the Legislature since 2015, after opting for a written report last year. LePage has had a strained relationship with the Legislature for much of his term, and several Appropriations Committee members praised him for his appearance Monday.

“It’s not a great way to govern our state by referendum and I think we all in this room have responsibility for that,” said Rep. Gay Grant, D-Gardiner. “But I take this and your being here as a positive sign that we are going to start afresh, that we are going to tackle the problems that you’ve outlined.”

LePage hinted at a potential thaw with lawmakers who have criticized him for not allowing some commissioners or other administration officials to appear in person.

LePage said he still prefers to answer questions in writing but added: “If you have questions, I will be more than happy to answer them. And if we bring civility back, then I would be more than happy to allow people to attend.”

Kevin Miller can be contacted at 791-6312 or at:

kmiller@mainetoday.com

Twitter: KevinMillerPPH

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