AFA Update Friday, May 15, 2015: Republican tax proposal

As widely reported the Republicans on the AFA committee rolled out an alternative tax plan this afternoon.

The Speaker released the following statement:

“We have been waiting for Republicans to bring forward a plan since they have clearly rejected the Governor’s proposal. Time is short and we must get to work,” said Speaker Eves, D-North Berwick. “Democrats will be at the table fighting for a responsible budget that grows the economy from the middle out, with targeted tax cuts for middle- and low-income families and the wealthy paying their fair share. The new Republican proposal provides zero new property tax relief, while prioritizing huge tax breaks to corporations and the wealthy.”

Questions remain about how the plan is paid for in the future.

Audio of today’s rollout can be found here.

The materials shared by the Republicans are here.

Highlights are below:

Rs Tax Proposal

  • Revenue Sharing at $62M in FY16 and then $64M in FY17, roughly 2%.
  • Income tax brackets at
Income FY16 FY17
$0-$5,250 0% 0%
$5,251-$50,000 6.25% 5.95%
50000-∞ 6.75% 6.5%
  • General sales tax maintained at 5.5%
  • Increase Service Provider tax at 6% as proposed by the Governor
  • No sales tax base expansion
  • Increase the meals and lodging rates to 9%
  • Change the Estate tax to the $5.5M federal exemption level, rejecting the Governor’s repeal
  • Change corporate rate as proposed by the Governor
  • Keep Telecommunications Property Tax with the state not the municipalities as proposed by the Governor
  • Change BETR/BETE as proposed by the Governor
  • Retained the current Homestead Property Tax exemption

The Institute on Taxation and Economic Policy (ITEP) estimates that this plan is a net tax increase for people with less than $57,0000 in taxable income ($112,000 for couples)

The Maine Center for Economic Policy (MECEP) issued a statement condemning the Republican plan. They also released an ITEP distributional analysis:

Two ways to look at the bottom line are:

Net Change in State Taxes
FY16 FY17 Biennium
Governor*
44,300,000
(189,300,000) (145,500,000)
Better Deal Plan* 108,100,000 9,300,000 117,400,000
Republicans* 43,996,225 (96,477,858) (2,481,633)

*Based on December 1, 2014 Revenue Forecasting Committee report

Impact on GF Budget
FY16 FY17 Biennium
Governor* 148,900,000 (22,600,000) 126,300,000
Better Deal Plan* 187,200,000 86,800,000 274,000,000
Republicans* 139,004,520 (7,780,547) 131,223,973

*Based on December 1, 2014 Revenue Forecasting Committee report
Rep. Winsor said, “We don’t have support for any of the existing plans.”

Sen. Valentino asked a series of technical questions on the Other Prepared Foods, Meals and lodging and the general sales tax as the numbers in the AFA Rs proposal differ from the generally accepted numbers.

In response OFPR staff cautioned that the plan will need to be scored fully and these numbers represent estimates.

The Appropriations committee will meet on mic again on Monday but the caucuses will continue their work this weekend.

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