Maine's Democratic-controlled House supported a $6.7 billion budget deal on Tuesday that slashes income taxes, boosts property tax relief and changes how the state reimburses for welfare programs after weeks of partisan wrangling over a spending plan that must be in place by June 30 to avert a government shutdown.
The House voted 101-47 to give initial approval to the spending plan and unanimously approved an amendment that includes the tax and welfare pieces agreed to by legislative leaders on Monday after intense negotiations. The bill heads to the Republican-led Senate.
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House Democratic Leader Jeff McCabe called the budget a "true compromise" and an example of how divided government can work.
"There was a lot of give, there was a lot of take," McCabe said. "There are some benefits for both sides here."
When all the tax changes in the proposal are considered, Maine residents would see a tax decrease of $135.4 million in 2017, according to documents provided by legislative leaders. But while roughly 580,000 families would get a tax cut, almost 120,000 others would see their taxes go up in 2017 under the proposal.
The agreement is the result of weeks of negotiations between the top Democrats in the divided Legislature and House Republican Leader Ken Fredette, who insisted that a final spending plan include the GOP proprieties of lower income taxes and welfare reform.
Under the plan, the top individual income tax rate would be lowered from 7.95 percent to 7.15 percent, but most of the tax relief would go to the bottom 90 percent of earners. There would also be three income tax brackets instead of the current two. In 2017, those who make up to $21,050 would be taxed at 5.8 percent and those who make between $21,401 and $50,000 would be taxed at 6.75 percent. Anyone earning more than that would be taxed at the highest rate.
The income tax cuts would be paid for in part by keeping the sales tax at 5.5 percent, instead of letting it go down to 5 percent like it was supposed to on July 1. In addition, the 8 percent meals tax would remain the same and the lodging tax would increase to 9 percent in 2016. The proposal also eliminates the tax on military pensions and doubles the $10,000 homestead property tax exemption in 2017.
State aid to cities and towns would remain roughly $62.5 million a year, but there would be big changes in how the state funds general assistance — the all-purpose, last resort welfare program administered by municipalities. The state would reimburse all cities and towns 70 percent of the costs of the program. While most municipalities are currently reimbursed for 50 percent of the costs, large cities like Portland receive 90 percent of the cost once they reach a certain threshold in an effort to help municipalities where many people seek aid.
The House also approved an amendment that would ensure that the roughly 1,000 people who are seeking asylum in Maine can continue to receive municipal welfare benefits. But it's unclear whether the amendment will survive in the Senate.
Republican Gov. Paul LePage directed cities and towns last year to stop providing general assistance to certain immigrants, including those who came to the United States illegally and asylum seekers. A court ruled last week that his administration doesn't have to reimburse towns for aid provided to those groups.
Lawmakers planned to send the budget bill to LePage on Tuesday. He has 10 days to sign it, veto it or let it go into law without his signature. He said on the Howie Carr show that he was waiting to see more details and suggested lawmakers were going to debate without knowing what's really in the budget.
"It's more like a Nancy Pelosi-type deal. We pass it and then we tell you what it is," he said.
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