Three Percent High-Earner Tax Changes Under Consideration

Among the issues Maine’s Legislature is wrestling with is the question of whether to repeal or mitigate the impact of the 3% high-earner income tax surcharge enacted via Question 2 in the statewide referendum last fall. The surcharge is earmarked for a fund for education. Last week, Keep Maine Competitive, a new coalition led by the Maine State Chamber of Commerce, announced its intention to lead the effort to remove the 3% surcharge. The first public hearing on this issue was held Friday, February 10, when the Appropriations and Taxation Committees listened to Administrative and Financial Services Commissioner Richard Rosen present Governor LePage’s proposal to delay the effective date of the 3% surcharge until tax year 2018, reduce Maine’s marginal income tax rate to 2.75%, and apply the 3% surcharge to all taxpayers, thereby creating a 5.75% flat tax for Maine. Over the next several weeks, the Taxation Committee will hold hearings on the 25 other bills proposing to delay, reduce, repeal or mitigate this surcharge. While everyone supports a healthy education system, the Keep Maine Competitive coalition asserts that the 3% surcharge is not the appropriate method, and, left untouched, will have a devastating impact on Maine’s economy.

Conflict of Interest Question Raised

Governor LePage and other Republican leaders have called for Representative Ryan Tipping to step down from his post as House Chair of the Taxation Committee claiming a conflict of interest. Their claim arises from reports that Rep. Tipping was paid by a political action committee to work on the campaign that supported passing the 3% high-earner tax measure. The Taxation Committee will be hearing several of the bills that address the high-earner tax surcharge. Rep. Tipping has responded to this conflict of interest claim by stating he sought and obtained approval by the Maine Ethics Commission and has no plans to step down as House Chair, or to resign from the committee.

Determining Structure for Marijuana Marketplace

Although it became legal in Maine on January 30, 2017 for an adult at least 21 years of age to possess 2.5 ounces of marijuana, the legal retail sale of recreational marijuana has been postponed until at least 2018. This week, members of the Legislature’s Committee on Marijuana Legalization Implementation began reviewing the policies of three other states that have legalized adult recreational use of marijuana. Lawmakers are focused on developing an implementation plan that will, among other things, address licensing and enforcement of sales and provide guidance to employers.