March 21, 2013

Bowdoinham Democrat floats plan to raise taxes on Maine's wealthy

Rep. Seth Berry's proposal would impose a tax-equalization assessment on state residents who make $250,000 or more.

By Steve Mistler smistler@pressherald.com
State House Bureau

AUGUSTA — The Legislature's House Democratic leader is proposing a bill that he says will create "tax fairness" between Maine's high earners and everyone else, a proposal that aligns with a national effort among Democrats to fill budget gaps by raising taxes on the wealthy.

Rep. Seth Berry, D-Bowdoinham, says his proposal, L.D. 1113, would fill half of the projected $400 million gap in the next two-year budget -- a shortfall attributed to a tax-cut package passed by the Legislature in 2011, when Republicans held the majority.

Berry's bill is short on details. He has submitted the concept but not the actual language to the Legislature, and he would only say Thursday that the bill will address sales, property and income taxes to produce "an equalized tax rate" for Mainers.

If enacted, Berry's proposal would impose a tax-equalization assessment on Maine residents making $250,000 or more if the effective rate they pay in income, sales, use and local property taxes falls below a state average determined by Maine Revenue Services.

Mainers now pay 11 percent, on average, of their incomes in state and local taxes; but the state's highest earners pay an average of 10 percent, according to data cited in a release by House Democrats.

Berry's so-called "Buffett Rule" bill would ensure that the state's highest earners pay at least the state average of 11 percent. Conversely, income tax filers who make less than $125,000 and pay more than 11 percent in state and local taxes would qualify for a tax-equalization credit.

The measure reflects a growing trend.

Over the past year, Oregon, California, Hawaii, New Jersey and North Carolina have raised tax rates on wealthy residents to raise revenue amid the slow economic recovery.

Earlier this week, the New York Legislature forged a budget deal with Gov. Andrew Cuomo that would raise taxes, at least temporarily, on individuals earning seven figures while giving a tax credit for middle income earners and providing additional tax breaks for businesses.

Berry's bill, while similar in concept to proposals in other states, is more comprehensive.

In a press statement, Berry said his bill would generate $200 million in state tax revenues in the first two-year budget cycle.

According to Maine Revenue Services, there were 7,388 households, or tax families, with a Maine adjusted gross income of $250,000 in 2011, the most recent tax year. Those earners accounted for 1.2 percent of all tax filers that year.

Those same tax families paid the state $267.8 million in income taxes, accounting for 21 percent of the state's income tax revenue.

According to a 2011 study by Maine Revenue Services, 43 percent of all taxes collections in Maine were property taxes. That same study showed that homeowners earning $12,167 or less paid the highest percentage of personal income on property taxes, 30.6 percent. Homeowners earning more than $108,724 paid 2.5 percent toward to property taxes.

The same study showed that low-income earners paid the highest percent of their income in sales taxes. Residents earning $12,167 or less paid 3.7 percent in sales taxes, while those earning more than $108,724 paid 1.3 percent of their income.

Berry said his bill would address the disparity of all taxes.

"We're going big, looking at the whole picture," he said Thursday.

The proposal has been foreshadowed for the last month by organizations claiming that the tax cuts passed in 2011 skewed toward the state's wealthy. The public relations effort, spearheaded by the Maine People's Alliance, is a coordinated movement overseen by the national group Americans for Tax Fairness.

That national group, co-chaired by Neena Tanden, a former member of the Obama and Clinton administrations, boasts partners in nearly 20 states, including Maine.

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