An Augusta-based economic policy group that focuses on income inequality says Maine has reached a key milestone toward “tax fairness.”

Thanks to recent moves by the Legislature, Maine is now one of only six states, plus the District of Columbia, in which the poorest residents will pay a smaller percentage of their income in taxes than the wealthiest residents, according to a report issued Wednesday by the liberal think tank Maine Center for Economic Policy.

The center cited a 2018 report by the Washington, D.C.-based Institute on Taxation and Economic Policy that said only five states and the District of Columbia had tax codes in which the bottom 20 percent paid a lower average effective tax rate than the top 1 percent. It said legislative changes this year in Maine will allow it to join that short list.

The center said an expansion and modernization of Maine’s Earned Income Tax Credit, a boost to the Property Tax Fairness Credit and an increase to the Homestead Exemption will make it so the state’s top 1 percent of earners pay a greater share of their income in taxes than the bottom 20 percent starting in 2020.

“For decades, the wealthiest Mainers have paid less of every dollar they earn to taxes than those who earn the very least. Now, finally, that injustice in our tax code has been corrected,” Sarah Austin, a policy analyst for the Maine Center for Economic Policy and the report’s author, said in a prepared statement. “As a result, Mainers who are hurt the most by income inequality and the rising cost of living will have more money in their pockets to help make ends meet.”

According to the report, the poorest 20 percent of Mainers have paid a higher average effective tax rate than the top 1 percent since at least as far as 1996.

In 2019, the wealthiest households in Maine paid less in taxes by that measure than any other income group, it said. The report includes a graph showing that the top 1 percent of earners in Maine had an average effective tax rate of 8.56 percent in 2019 prior to the legislative changes, compared with a tax rate of 8.72 percent for the lowest 20 percent of earners.

Jacob Posik, director of communications for the conservative policy group Maine Heritage Policy Center, reacted to the report by saying the Maine Legislature still could do more to reduce the tax burden on residents. His organization favors across-the-board tax cuts that Posik said would make Maine more competitive with other states for economic growth opportunities.

“Real tax fairness will be achieved when the state returns surplus revenues to taxpayers instead of spending it on feel-good legislation that only tinkers on the margins without addressing the underlying issues of unnecessary spending and over-taxation,” Posik said.

 

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