LePage to continue campaign for his budget, tax overhaul plan in State of the State address

Economic Indicators Associated Press

Gov. Paul LePage is back on the campaign trail.

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But this time, instead of fighting to keep his job, the Republican is working to persuade lawmakers and residents to support his plan to overhaul Maine's tax code by dramatically cutting the income tax while raising and expanding the sales tax.

LePage has been touting his proposed $6.3 billion budget at events and on social media and radio programs since he unveiled it last month. On Tuesday, he is expected to make his case before a joint session of the politically divided House and Senate with his State of the State address.

The governor says the only way to improve Maine's business climate and competitiveness is to move more toward what he calls a "pay as you go" tax system.

"In order for us to get out of poverty and into prosperity, we need to make some bold actions," he said on a Maine Public Broadcasting Network program last week.

He wants to lower the top personal income tax rate from 7.95 percent to 5.75 percent by 2019, raise the sales tax by 1 percentage point and broaden it to include things like dry cleaning and garbage removal.

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He also is seeking to change the structure of the tax brackets so that more low-income families pay no taxes while people with the highest incomes pay a smaller percentage of taxes than those in the middle.

Under his plan, a person who makes between roughly $50,000 and $175,000 in 2019 would be taxed at 6.5 percent while those who make more than $175,000 a year would be taxed at 5.75 percent. A person who makes less than about $10,000 a year would pay no income taxes.

Critics contend that LePage's plan would benefit the richest while shifting the burden onto middle class in the form of increased sales and property taxes.

Joel Johnson, an economist with the left-leaning Maine Center for Economic Policy, called the plan "fiscally irresponsible" and questioned how it will be paid for down the road without funding cuts to programs and schools.

"We think that this threatens the quality of our schools, the quality of our local communities and it does so at the expense of just unnecessary tax breaks for the richest Mainers," he said.

Dick Woodbury, an economist and former independent state senator, countered that LePage's proposal includes several provisions that would greatly benefit lower and middle income families, like the larger tax-exempt bracket, a new sales tax credit and an expanded property tax fairness credit.

Woodbury, who led a similar tax overhaul effort in 2013, said the plan makes sense for Maine, which is the part-time home to many people who don't have to pay the state's income tax, like retirees, people with summer homes and tourists.

"You can use the sales tax to draw a fairer share from that nonresident population that is benefiting from our environment and communities and quality of life," he said.

Lawmakers from both parties have said little publicly about the governor's proposal since it was unveiled.

They say they need time to grasp how the complicated proposal would impact their constituents, but they're also trying to figure out how to navigate the politically tricky issue of major tax changes.

"In tax reform, there's always a lot of political opportunism," Woodbury said, pointing to Republican lawmakers' use of a similar proposal in the 2010 campaigns to attack Democrats and get elected. "You want to say everybody up there is trying to make good policy all the time but the parties are also trying to regain their power."

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