3% Surcharge To Cause Loss of Revenue, Not Gain

On Monday, May 1, the Maine Revenue Forecasting Committee reported to the Governor and Legislature on first quarter estimated individual income tax payments. Surprisingly, the revenues were $9.3 million under budget (they had projected a 25% increase due to the 3% income tax surcharge adopted by referendum last November), and flat when compared to the same period last year. The Committee’s report speculates that high earner taxpayers may have either sheltered their income through safe-harbor provisions, or that the surcharge is making up for a reduction in estimated 2017 income. The report further speculates that a reduction in 2017 income could be due to taxpayers having shifted income that could be shifted into 2016 to avoid the 3% surcharge, or moving their 2017 income out of state. Regardless, the Committee has adjusted its forecast to reflect an assumed reduction of approximately $250 million in taxable income, which will result in a $30 million decrease in annual individual income tax revenue from the top 1% of taxpayers. Converting this drop to the state’s fiscal year, the Committee projects a decrease in income tax revenue of about $16 million in the upcoming fiscal year, and more the following years. Our first reaction is that this is not the expected result from those who voted in favor of Question 2.

Maine Leads in Tax Incentive Accountability

The national Pew Foundation has cited Maine as one of the nation’s top ten states for its accountability of tax incentive programs. Tax incentive programs include tax credits, exemptions and reductions for meeting certain criteria, and are designed to stimulate and encourage desired activity in the economy. Maine received this top rating due to its rigorous process to regularly evaluate the effectiveness and impact of its tax incentive programs, and its use of the evaluations for future policy considerations. For example, the recent report by the Office of Program Evaluation and Government Accountability on Maine’s New Markets Capital Investment program was noted for its return of $1.19 to Maine for every $1.00 invested in the program, and for creating 764 permanent jobs and 781 temporary and indirect jobs. In 2015, it was the Pew Foundation that drove the enactment of the law in Maine that established the evaluation process it is now rating.

LePage Sues Maine Attorney General

Governor Paul LePage has filed a lawsuit against Democratic Attorney General Janet Mills, claiming she has abused her authority by refusing to represent the executive branch in certain court challenges. The questions at hand are whether or not Maine’s attorney general, who is elected by the Legislature and serves as one of Maine’s three constitutional officers, has the authority or ethical obligation to refuse to represent the executive branch when she doesn’t agree that the case has merit.

Rooftop Solar Advocates Brighten the Hallways

On Thursday, May 5, dozens of rooftop solar advocates lined the entryways and hallways of the Capitol Complex sporting yellow T-shirts and sweat shirts before lining up to testify on a bill that would incentivize more rooftop solar energy generation. At issue is the shift in costs to non-solar energy purchasers. The legislation would override a policy issued by the Maine Public Utilities Commission in January which phases out the compensation paid to solar power producers.

Popular Welcome Back Day at the Legislature

Also on Thursday, the State House was abuzz with former legislators and legislative staff at the legislature’s annual “Welcome Back” day. Old friends and colleagues greeted each other with warm handshakes and hugs, shared stories reminiscing of the good old days, and caught up on current life activities. All past and current members and staff were treated to a buffet lunch and ice cream social in the Hall of Flags before current members headed off to their respective committees for public hearings and work sessions.