LePage Budget Proposes Steep Spending Cuts, Lower Income Tax

Jan 7, 2017

 

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Gov. Paul LePage is proposing deep cuts to Maine’s welfare programs, slashing 500 state government jobs and broadening the state’s sales tax to pay for a reduction in the state income tax in his $6.8 billion two-year budget plan.

Overall, the spending plan attempts to counter an increase in the tax on high income earners passed by voters in November while furthering the governor’s longheld plan of reducing the state income tax.

 

The proposal was released late Friday without the the traditional briefings to legislative leaders who will ultimately decide which elements of the governor’s budget will survive.

 

The proposal, LePage’s final as governor, aligns with his desire for a lower income tax and pays for it with steep cuts in state programs, while broadening the sales tax to currently exempt goods and services.

 

LePage also takes direct aim at Question 2, a ballot initiative that adds a 3 percent tax on Mainers making $200,000 a year to pay for local education.

 

The governor has frequently railed against the ballot initiative, saying will discourage investment and drive out high earners.   

 

LePage’s budget delays the implementation of Question 2, while phasing in reductions of the income tax. The governor’s plan reduces the state’s tax brackets from three to two over the next two years. During that time, the surcharge to pay for education funding would be paid for by Maine’s highest and lowest earners -- a sharp departure from the referendum approved by voters, which put the burden on high earners.

 

By 2020, LePage envisions a flat tax of 5.75 percent, factoring in the 3 percent education funding surcharge approved by voters.

 

The governor’s budget message made frequent reference to two citizen initiatives passed by voters in November. He said the implications of the ballot questions was not understood by voters.

 

“Now more than ever, after well-meaning citizens voted on these initiatives with little or no understanding of how destructive they would be to Maine’s fragile economy, we are teetering on the precipice of a financial catastrophe,” LePage wrote. “I cannot in good conscience submit a budget that would exacerbate the damage to our economy and hurl the state over the edge.”

Other budget highlights include:

  • Increasing the lodging tax rate from 9 percent to 10 percent.

  • Allowing towns to tax large nonprofits with properties of $10 million or more.

  • Removing tax exempt status for land trust organizations.

  • Eliminating the state formula to fund local school administration and encouraging district consolidation with a $11 million fund to pay for it.

  • Creating a statewide teacher contract.

  • Repealing and replacing the state’s local education formula.

  • Eliminating the General Assistance program that provides money to towns for low income family assistance.

  • Eliminating the current state cap on public charter schools.

  • Cuts eligibility for MaineCare health coverage for parents who are able to work and who currently earn over 40 percent than the federal poverty level.  According to federal guidelines, a person at 100 percent of the poverty level makes $11,880 a year.

The document contains a slew of other initiatives that are now in the hands of the Legislature. The governor’s budget will now be subject to intense scrutiny by lawmakers and affected interest groups. Governor’s budgets are routinely altered by the Legislature before they are enacted. That has been the case with LePage, whose previous budgets have included bold and controversial initiatives, many of which have been rejected.

 

Reaction to the proposal by legislative leaders was reserved late Friday.

“We will be carefully reviewing Governor LePage’s budget proposal,” House Speaker Sara Gideon, D-Freeport, said in a statement. “Our focus will be on strengthening middle class families, schools, and seniors, while growing good paying jobs and a strong economy. This is the beginning of a long process and we are committed to the hard work ahead.”