In a virtual public hearing, the Joint Taxation Committee heard opposition from Democratic Gov. Janet Mills' administration to H.P. 361, which would add an income tax surcharge on higher earners, and H.P. 364, which would raise the top corporate tax rate.
Anya Trendy, director of legislative affairs for the Maine Department of Administrative and Financial Services, told the committee that the state should avoid large tax increases so as not to hinder the state's recovery from the economic downturn caused by the novel coronavirus pandemic.
"While we are seeing some positive signs, avoiding tax increases of this magnitude is an important component in well positioning the state to economically rebound quickly and strongly," Trendy said.
H.P. 361, which was introduced Feb. 17 by Rep. Michael Sylvester, D-Portland, would impose a 3% surcharge on individuals with taxable income over $200,000 and expand the state earned income tax credit to conform to the full federal credit amount effective Jan. 1, 2022.
H.P. 364, proposed Feb. 17 by Rep. Heidi Brooks, D-Lewiston, would increase the top corporate income tax rate from 8.93% to 12.4% on income over $3.5 million beginning in 2022.
The department said that the earned income tax credit expansion would cost the state approximately $175 million per year and that the corporate income tax increase would raise $75 million annually.
The department added that it could not determine the fiscal impact of the individual income tax increase "without clarification on whether the surcharge is applied to the taxable income of estates and trusts and how it is applied to married taxpayers filing joint returns."
Sylvester told the committee that the individual income tax surcharge was approved by referendum in 2016 to support education funding and that with the pandemic burdening essential workers, the surcharge should be reimposed to fund the expanded earned income tax credit.
The bill "asks those who make the most to give a little to help our economy recover," Sylvester said.
"Maine's program boosts Mainers' income by $25 million, but we could be doing more," Sylvester said. "Frankly, Maine's workers deserve it. Frankly, they need it."
In her testimony, Brooks also cited the hardships imposed by the pandemic to support her corporate tax proposal, noting the disparities between corporations and individuals and the need to support the state's economy.
"The inequity facing Mainers has become more evident during this crisis," Brooks said. "Many are struggling to afford housing, utilities, food and health care. Many of the multibillion-dollar corporations are profiting while their employees aren't even making a livable wage."
Public comment on the measures was largely divided between supporters who claimed the bills would rebalance the state tax code and economy in favor of those in need and opponents who said the tax increases would drive away businesses and burden major industries like health care and manufacturing.
Ann Danforth, a policy advocate for Maine Equal Justice, told the committee that the earned income tax credit was an effective antipoverty measure, adding that "the extra money provided by the EITC can help working people meet basic needs and pay for things that enable them to keep working."
Eamonn Dundon, advocacy director for the Portland Region Chamber of Commerce, representing the state's most populous city, said that while it supported programs for the most needy, "tax increases of this nature will impede our recovery from COVID-19 and are antithetical to the long-range economic plans of our state."
In an email to Law360 afterward, Eamonn said that the chamber opposed the surcharge in 2016 for many of the same reasons it does now, adding that "we are sure that a surcharge in an economy devastated by a global pandemic will not be successful."
Danforth told Law360 that H.P. 361 "helps make our tax system more equitable by taxing the wealthiest households in Maine in order to provide a widespread benefit to people who need it the most."
A representative of \the department sent a copy of its committee testimony to Law360 but did not immediately respond to specific questions on the testimony.
The offices of Sylvester, Brooks and leadership of the committee did not immediately respond to requests for comment.
--Additional reporting by Jaqueline McCool. Editing by Vincent Sherry.
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