Maine Democrats unveil tax plan

AUGUSTA — Democratic legislative leaders fired a shot directly at Gov. Paul LePage’s tax reform proposal Thursday with the release of their own plan, which includes lower income tax cuts than the governor proposes but is more aggressive in its effort to soften Mainers’ property tax burden.

“While Democratic leaders commend the governor for initiating a much-needed conversation about tax reform, his budget takes Maine in the wrong direction,” a document released Thursday by the Democrats reads. “Maine’s economy lags behind the nation in job growth and wages. His budget will make it worse.”

Democrats planned to unveil the proposal during a 1 p.m. media event at Cony High School in Augusta.

Brent Littlefield, LePage’s chief political strategist, hadn’t seen the details of the Democrats’ proposal Thursday morning but said anything that veers away from LePage’s plan defies the will of the voters who in November elected the Republican to a second term.

“The whole concept is rich, from a party that has spent decades increasing taxes and burdens on the Maine people,” Littlefield said. “This rhetoric about the state’s economy being behind the nation is false rhetoric that was rejected by the voters last November.”

The Democrats’ unveiling of the detailed plan, which has been dubbed “A Better Deal,” shows that their strategy over the next two months will be to supplant LePage’s tax reform proposal with their own as opposed to fighting it piecemeal, as they have with some of LePage’s past proposals. It also shows that Democrats are trying to take the offensive after years of being kept on their heels, politically, by LePage.

On the other hand, it acknowledges a victory for LePage in terms of the fact that his call for tax reform appears headed to fruition in some form.

With support from Republican majorities in the 125th Legislature, LePage shepherded through the largest tax cut in Maine history in 2011. But other tax reform proposals, made up largely of Democratic efforts to expand the sales tax base and Republican efforts to cap taxes or state revenues, have failed during the past decade.

Still, the Democrats appear ready to set up a game of political chicken with a governor who relishes confrontation, which in this case could result in a veto of the biennial budget late in this year’s legislative session, which is scheduled to conclude in June.

The prospect of such an impasse already has triggered talk of a state government shutdown, which is what happened in 1991, when Republican Gov. John McKernan butted heads with legislative Democrats over workers compensation system reforms.

According to materials provided in advance, several elements of the Democrats’ plan include the following:

— Shifting LePage’s proposed income tax cut away from high-income earners decidedly toward taxpayers with lower incomes.

— Keeping the sales tax rate at 5.5 percent instead of increasing it to 6.5 percent, as LePage proposes. The Democrats agree with LePage about broadening the number of items subject to the sales tax and creating a tax credit to help offset any increase in the overall sales tax burden for Mainers.

— The Democrats propose doubling the homestead exemption for everyone, whereas LePage proposes doubling it for property owners over age 65 and eliminating it for everyone else. They also agree with LePage about instituting a property tax fairness credit.

— The Democrats’ plan would keep the meals tax at 8 percent, instead of reducing it to 6.5 percent, as LePage proposes. The Democrats would move the lodging tax to 8 percent, as would LePage.

— The Democrats seek to increase funding for municipal revenue sharing to $80 million in each of the next two years. LePage proposes flat funding it at $62 million next year and eliminating it the year after.

— The Democrats propose making no changes to the estate tax, which LePage wants to eliminate, and rejecting Lepage’s proposal to tax large nonprofit organizations.

Republican legislative leaders have scheduled a media event at 2:30 p.m. Thursday to respond to the Democrats’ proposal.

Brent Littlefield, LePage’s chief political strategist, said anything that veers away from LePage’s plan defies the will of the voters, who in November elected the Republican to a second term.

The Democrats’ unveiling of the detailed plan, which has been dubbed “A Better Deal for Maine,” shows that their strategy over the next two months will be to supplant LePage’s tax reform proposal with their own as opposed to fighting it piecemeal, as they have with some of LePage’s past proposals. It also shows that Democrats are trying to take the offensive after years of being kept on their heels, politically, by LePage.

On the other hand, it acknowledges a victory for LePage in terms of the fact that his call for tax reform appears headed to fruition in some form.

House Speaker Mark Eves, D-North Berwick, said a key component of the Democratic plan is that it doesn’t create a revenue hole that will lead to severe cuts in services. Democrats argue that LePage’s plan would do so, but the governor has said reducing Maine’s overall tax burden is essential to lifting the state out of its lengthy economic malaise.

LePage’s proposed tax cuts wouldn’t go into full effect until the 2017-18 biennium. That means services will have to be cut in two years because of revenue cuts being proposed now.

“Our proposal is fully paid for, and it won’t leave a $300 million hole in the budget,” said Eves. “The governor’s budget sets the stage for a future of deep cuts to our schools.”

House Minority Leader Ken Fredette, R-Newport, said during a news conference Thursday afternoon that neither the Democratic budget, nor LePage’s, is focused enough on reducing revenues.

“Nowhere do I see a serious conversation about expenditures,” said Fredette. “I’m very concerned, for example, with the governor’s budget proposal for $20 million in extra spending for the University of Maine [System] budget. I know the UMaine budget is having a tough time right now, but I think we need to look at state revenues and state expenditures and say, ‘Is that something we can afford right now?’”

Asked where he would cut spending, Fredette reiterated the UMaine System but said he also would look to social services provided by the Department of Health and Human Services and state education funding for K-12 public schools.

“You can’t look at reductions in expenditures if you’re not looking at those two departments,” he said.

Senate President Justin Alfond, D-Portland, said that in addition to providing tax relief for low- and middle-income earners as opposed to the rich, the Democratic proposal is based on the belief that helping Mainers who are already here — as opposed to trying to attract people and businesses to Maine, such as incentives in LePage’s budget seek to do — makes more sense.

“The better deal is making an investment,” he said.

The Democrats’ plan includes:

— Shifting LePage’s proposed income tax cut away from high-income earners decidedly toward taxpayers with lower incomes.

— Doubling the homestead exemption for everyone, whereas LePage proposes doubling it for property owners over age 65 and eliminating it for everyone else. They also agree with LePage about instituting a property tax fairness credit.

— Keeping the meals tax at 8 percent, instead of reducing it to 6.5 percent, as LePage proposes. The Democrats would move the lodging tax to 8 percent, as would LePage.

— Increasing the funding for municipal revenue sharing to $80 million in each of the next two years. LePage proposes flat funding it at $62 million next year and eliminating it the year after.

— Making no changes to the estate tax, which LePage wants to eliminate, and rejecting LePage’s proposal to tax large nonprofit organizations.

Democrats said they will not propose a separate budget or tax reform bill to complete with LePage’s, but they would instead try to work their priorities into budget negotiations that will take place at the State House over the next two months.

A biennial budget bill must be passed by June 30, which is when the current fiscal year ends. It will have to have the support of two-thirds of the Legislature to take effect on July 1.