Paul LePage Promotes Tax Reform in Maine's State of the State

by | February 4, 2015

By Mario Moretto

Gov. Paul LePage on Tuesday evening pitched a vision for "prosperity, not poverty" during his annual State of the State address.

MORE: Text, highlights and video of every governor's annual address.

The adage is quickly becoming the overarching message of LePage's second term. For the governor, the path to prosperity is paved with the hundreds of pages from his budget proposal, which contains a dramatic tax reform plan that would eliminate the estate tax and cut the state's income tax by more than half a billion dollars annually by 2019.

The governor spent the bulk of his roughly hourlong speech on the budget, which he said would "drive prosperity for years to come. It looks past the next election and focuses on the next generation."

But the governor's end game isn't a reduced income tax rate -- it's the elimination of the tax altogether. He announced Tuesday his desire for a constitutional amendment that would use future revenue growth to pay for reductions in the state income tax until it's gone.

"My vision for Maine is a Maine without an income tax," LePage said. "But I'm not a magician. It's going to take a little time, and it takes help. I can't do it alone, and I'm asking for your help."

That idea presumably builds on an initiative passed by LePage and Republicans in 2011 that established the Tax Relief for Maine Residents Fund. The fund, which receives a small portion of any surplus revenue, is designed to ratchet down the income tax rate as soon as enough cash is on hand to afford it.

The income tax cut proposed in LePage's budget pays for the lost revenue, in part, with a higher, more broadly applied sales tax. It's an idea that has been a hard sell before, but LePage asked the 186 lawmakers in the Maine Legislature to help him get it done.

LePage's $6.57 billion, two-year budget came as something of a shock to many in Augusta. Observers anticipated an attempt to reduce the state's income tax, but few expected the comprehensive tax reform package that has become the cornerstone of the budget.

Republican lawmakers, many of whom campaigned against similar reforms four years ago, were caught especially off guard. Democrats have made overtures about working with LePage on tax reform, but have stressed that it's workforce development and job creation that will stimulate Maine's economy -- not lower taxes.

The governor's proposal also eliminates taxes on military pensions, eliminates state aid to municipalities, and includes a plan to let towns and cities tax their largest nonprofit groups.

While the tax reform plan dominated the State of the State address, LePage's vision for prosperity also included continued efforts to reform welfare, limit state assistance for undocumented immigrants, increase funding for law enforcement efforts to fight drug crime, and reduce energy costs.

The governor struck an amicable if stern tone with lawmakers, but fired a few salvos at the Maine Municipal Association, an organization that represents the state's nearly 500 towns and cities.

The group has been a vocal opponent of LePage's effort to dismantle revenue sharing, the state program that redistributes tax revenue to pay for local government and services. LePage attempted to eliminate revenue sharing in 2013 but was rebuked by the Legislature.

This year, LePage has set his sights on the program again, and MMA is already preparing its opposition, saying reductions in state funding will cause painful increases in property taxes as municipalities try to make up for lost funding necessary to provide essential services.

The governor said the organization lobbies for municipal officials, not local taxpayers.

"They should be called the Middle Man Association," LePage said. "They pit local taxpayers against local officials. They fight against any kind of tax reduction."

(c)2015 the Bangor Daily News