Big tax changes could become a reality as both LePage and Democrats push for system overhaul

Efforts to transform Maine's tax code have failed time and again. But with tax overhaul proposals from both parties now on the table, 2015 could be the year that Democrats and Republicans finally agree to at least some significant changes, which would have a big impact on residents' wallets.

"I think this is a tremendous opportunity," said Dick Woodbury, an economist and former independent senator who spearheaded a 2013 tax overhaul effort that failed. "To have the governor taking a strong role in proposing an initial plan and Democrats as a party advance a plan that is also quite comprehensive seems to me like a great setting for really accomplishing something significant."

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Republican Gov. Paul LePage's tax plan, which is part of his more than $6 billion budget proposal, and the one released Thursday by Democratic lawmakers differ in many ways. But there is one key area on which both the governor and Democrats agree: The sales tax base should be expanded — shifting more of the burden onto out-of-state visitors — to help pay for tax relief for Maine residents.

"Now we've got both major parties debating not whether to give tax cuts but to who and how large the tax cuts should be," said Lance Dutson, a Republican political strategist.

That's giving hope to those who have long advocated for such changes that they may finally come to fruition. But big obstacles remain and major differences need to be worked out before the two sides can craft a final budget by June 30 to prevent a government shutdown.

LePage and many Republican lawmakers want to aggressively cut the individual and corporate income tax and eliminate the estate tax to make Maine more attractive to businesses and wealthy retirees.

Democrats agree with LePage that the sales tax base should be expanded to include things like amusement parks, which supporters say will collect more revenue from tourists. They also agree that the income tax should be lowered, but not for the highest earners and not for corporations. They want the focus to be on reducing the property tax burden and cutting income taxes for low- and middle-income residents.

Dutson said he believes that Democrats will have a hard time "wrestling the microphone away from the right side of the aisle" and gaining traction for their policies because they waited nearly three months to unveil a competing tax plan. In the meantime, LePage has been aggressively promoting his proposal at forums across the state.

Democrats plan to hold similar town hall meetings and say residents will see that their plan is clearly a better deal for working-class families when they understand the details of their proposal.

"The choice is very clear to us because we think that it is the right thing to do and we believe that it is the right approach to growing our economy," Democratic House Speaker Mark Eves said Thursday.

While similar tax reform efforts repeatedly have been defeated in the Legislature, the difference this time around, observers say, is that LePage has forced lawmakers to confront the issue by including it in his budget proposal instead of pushing a stand-alone bill. Political fights in the coming months are inevitable, but Woodbury said he believes that lawmakers will ultimately succeed in finding a compromise.

"I think there is a realization among legislators that there is a real opportunity here that would a shame to let pass," he said.


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