AUGUSTA – A political battle is heating up in the State House over whether Maine should conform the state income tax with new federal tax law, a move that would bring a wave of tax cuts valued at about $111 million.

The Legislature’s Taxation Committee on Monday began a close examination of Gov. Paul LePage’s tax conformity proposal, which critics say will benefit mostly the wealthy or out-of-state corporations. The committee budgeted four days of work sessions on the bill this week, a lengthy period that reflects its complexity and the high political stakes of the debate.

As proposed by LePage, the Conformity and Family Tax Relief Act would reduce personal income taxes by about $87.4 million and business taxes by $24 million over the next two years.

During his two terms as Maine’s governor, LePage has made cutting taxes a top priority for his administration and has been relatively successful, reducing the state’s top income tax rate from 8.5 percent in 2011 to 7.15 percent. Tax cuts advanced by LePage also eliminated state income taxes for the about 70,000 low income Mainers.

The current bill would eliminate the state income tax entirely for an additional 17,000 taxpayers. At the same time, it would also benefit the wealthy with a provision that exempts the first $20 million of an inheritance from estate taxes in Maine, quadrupling the current exemption total of $5 million.

The LePage administration has said it plans to pay for the tax breaks with $88 million in projected new revenues and $23 million in corporate assets brought back to the U.S. from foreign countries. Maine ended its most recent fiscal year in June with a revenue surplus of $111 million.

Sen. Dana Dow, R-Waldoboro, the Senate chairman of the committee, said he was convinced Maine needs new tax credits for businesses, valued at an estimated $24 million over the next two years, if it wants to compete with other states.

“Business always comes up on the short end of the stick,” Dow said.

“I know we want to look at all the details, but at the end of the day I’m looking at what I feel is good for business,” he said. “What’s good for business is good for the state of Maine. It will help companies grow, it will keep the young people here, it will bring more people in, bring some of these families back, at least not convince them to leave.”

But Democrats are largely leery of conforming Maine’s taxes to the federal code that was ushered in under a Republican-controlled Congress and President Donald Trump last December.

The House chairman of the committee, Rep. Ryan Tipping, D-Orono, said some states, like Kansas, that had rushed to cut state taxes too quickly were now raising them again because state government couldn’t pay for key services and infrastructure.

“If you don’t have a strong education system, if you do not have a strong infrastructure, whether it’s roads or broadband or everything else, if not making investments in your state, just like if you don’t make investments in a small business you are undercutting the future of your state,” he said.

Some committee members asked why they should devote three more days to discussing the details of the bill when it was clear the panel was sharply divided and would not reach a unanimous vote. Others, however, said it was the committee’s responsibility to get as much information as it could and try to achieve a degree of consensus.

“It is the cut first, ask questions later mentality that has led to the slashing of programs like child protective services,” Tipping said. “The Maine Revenue Service isn’t even sure what the long-term effects of this bill will be. We want to understand it as best as we can before we decide how we want to vote.”

The debate in Maine over new state tax cuts aimed at conforming state and federal tax policy will one of LePage’s last chances to further cement his legacy as a tax-cutting governor, during his final year in office – when all the seats in the Legislature are up for reelection and voters will also select LePage’s replacement in November.

The tax committee will continue its work on the bill at 1 p.m. Tuesday.

Scott Thistle can be contacted at 713-6720 or at:

sthistle@pressherald.com

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