Senate Minority Leader Trey Stewart (R-Aroostook) says Republicans will not support a budget that raises taxes during a press conference on Jan. 14, 2025. (Photo by Emma Davis/ Maine Morning Star)
Legislative Republicans vowed not to support a budget that includes any new taxes, placing the tax increases Gov. Janet Mills has proposed to make up part of the $450 million budget gap in the next biennium at the center of negotiations.
While Democratic leadership has refrained from indicating support one way or the other on Mills’ tax plans, some lawmakers in the majority party are separately eyeing other changes to the tax code, including taxing the wealthy and corporations at higher rates, in an effort to close the gap and prevent some of the health program cuts Mills has proposed.
When the governor released her budget plan Friday afternoon, she highlighted her proposal to raise the state’s cigarette tax by $1, which would generate about $80 million over two years, and touted it as a way to simultaneously reduce public health costs in the long-term. Mills also noted that her budget doesn’t include increases to Maine’s income or sales tax.
However, in addition to raising the cigarette tax, Mills’ budget would include raising or adding new taxes on cannabis, streaming services, pensions, ambulances and pharmacies, according to the full budget document made public later on Friday.
“There’s no need to raise taxes on Maine people across the board,” Senate Minority Leader Trey Stewart (R-Aroostook) said during a press conference on Tuesday. “And, secondly, there are no votes from the Republicans to do that.”
Mills’ $11.6 billion proposal is roughly $1.1 billion higher than the previous two-year budget, which Republicans also criticized.
When asked to weigh in on the tax proposals, Senate President Mattie Daughtry (D-Brunswick) and House Speaker Ryan Fecteau (D-Biddeford) deferred to their chambers’ respective chairs on the Appropriations and Financial Affairs Committee, which is now tasked with holding hearings on Mills’ budget plan and ultimately putting forth its own for the full Legislature’s consideration.
“It is far too early to draw lines in the sand,” Senate budget chair Peggy Rotundo (D-Lewiston) wrote in a statement. “At the end of the day, the Maine Constitution requires us to have a balanced budget, which means, by law, we cannot spend recklessly. While we acknowledge our state is in a different budgetary context than the last few years, I know that at the end of this process, we will have created a budget that is balanced and meets the needs of Maine people.”
Gov. Mills proposes raising cigarette tax, health program cuts to close budget gap
Other states are also seeing flattening and declining revenue as record spending and tax cuts during the COVID-19 pandemic end.
“We saw that coming, which is why in my supplemental budget proposal last year I urged lawmakers to amend certain programs to reduce spending and to save $107 million for the biennium as well,” Mills said when announcing her budget on Friday. Her proposed savings were ultimately halved in the supplemental budget that became law last year.
Mills said on Friday that she was holding out hope the Legislature would be able to pass a budget with two-thirds support to be enacted immediately, but did not say whether she’d veto a simple majority budget, which has been the approach of the Democratic majority in recent years. Her office did not respond to multiple requests for comment about her reasoning behind the tax changes she chose to propose and Republican objections.
“The ball is in their court whether they’re going to pass a majority budget or not,” Stewart said, referring to Democrats.
Proposed tax changes
The full budget plan the Mills administration posted Friday after her press conference includes new taxes on some products, services and pensions, aside from the cigarette tax.
Mills’ proposal includes a 4% increase in the cannabis sales tax — from 10% to 14%. It also proposes a phaseout of the state’s pension deduction for people who make more than $100,000.
Mills wants to add a 5.5% tax on streaming services, such as Spotify and Netflix. This comes after a similar plan in Mills’ budget last year failed to pass.
Two of the tax increases involve healthcare. Mills’ plan includes placing a new 70 cent tax on prescriptions for pharmacies and a tax on non-municipal ambulance service providers equal to 6% of their net operating revenue.
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While not commenting on these tax changes publicly, the Mills administration outlined the latter in a document on all the health policy changes in her proposal, explaining that the taxes can generate state revenue while still unlocking opportunities for federal funding. The administration is proposing the two health-related taxes to support the MaineCare program, the document reads.
The state is facing an immediate funding gap for MaineCare, the state’s Medicaid program, in the current fiscal year, which Mills is aiming to address through a separate supplemental budget. However, that gap is due to some factors, such as increased enrollment, that also need to be addressed long term.
Democrats say little about Mills’ tax proposals
Democrats have been mum about the proposed taxes in Mills’ budget.
“We just received Governor Mills’ budget proposal on Friday, and we are continuing to review the details,” said Taxation Committee chair Rep. Kristen Cloutier (D-Lewiston). “I’m looking forward to digging into her proposal over the coming days and weeks with both the Taxation and Appropriations Committees, where we will also receive important input from the public.”
Budget committee chairs have similarly vowed to closely assess the merits of Mills’ plan as that committee’s work gets underway.
“In each biennial budget, the Governor proposes a framework based on extensive work and discussion with departments and agencies across state government,” said House chair of the budget committee Rep. Drew Gattine of Westbrook.
“Now, that framework is in the hands of the Legislature, and our committee. We plan to closely examine the governor’s proposal as a committee, including the merits of the targeted revenues she has outlined, and produce a balanced budget that reflects the values and pressing needs of Maine people.”
Rotundo similarly promised a balanced budget, a statutory requirement, but took aim at how Republicans have characterized Mills’ budget plan overall.
“While we appreciate my Republican colleagues’ efforts to promote good governance, I would not characterize property tax relief, affordable healthcare, and funding for our education system as ‘reckless spending,’” Rotundo wrote.
Republicans vow oppose any budget that raises taxes
During the legislative Republican press conference on Tuesday, House Minority Leader Billy Bob Faulkingham (R-Winter Harbor) said, “The reckless spending has caught up with the Democrats, and now here come the tax increases.”
Faulkingham objected to each of the tax increases in the budget plan, sticking to his initial reaction of opposing taxes as a budgeting solution.
“I’ve heard that part of the goal of this tax is to curb smoking use,” Faulkingham said of the cigarette tax, “but it doesn’t really make a lot of sense to me because the same people that are saying that are giving out free unlimited heroin needles,” referring to syringe exchange programs.
Republican leaders and members of their caucuses vowed during the press conference to oppose a budget that increases taxes. On the House floor earlier Tuesday, Rep. Laurel Libby (R-Auburn) also announced she’s collecting signatures for a pledge to that effect.
“It is unacceptable to contemplate raising taxes on any Mainer right now, whether it’s increasing a tax or inventing a tax,” Libby said on the floor.
Senate GOP leader vows to work with Democrats while holding the line on taxes, state spending
Heading into the session, Senate Minority Leader Trey Stewart (R-Aroostook) told Maine Morning Star the state has a spending problem, not a revenue problem. Stewart repeated this view on Tuesday.
“It is not a taxation problem,” Stewart said. “It’s a spending problem.”
Stewart also continued his call for a state budget audit, specifically assessing the necessity of recent spending additions to figure out where cuts may be warranted. While declining to provide specifics, Stewart said Republicans met this week to discuss proposals for welfare reform and changes to address the MaineCare gap, which he added are aimed at “making sure that what we have in Maine is a safety net and not a hammock.”
Another forthcoming fight both within and outside the Legislature is the tax associated with the new statewide paid family and medical leave program, a signature achievement of Democrats in the last Legislature.
On Jan. 1, Maine began collecting a 1% payroll tax split between workers and businesses with 15 or more employees to fund the program, which Republicans had opposed last session and are now looking to defund. Rep. Joshua Morris (R-Turner) has filed legislation to repeal the new payroll tax and other Republicans took aim at the program during the press conference.
When talking about affordability struggles in his district, Assistant Senate Minority Leader Matthew Harrington (R-York) said, “The final nail in the coffin was the Paid Family Leave Act.”
Separately, on Monday the Maine State Chamber of Commerce and Bath Iron Works filed a lawsuit against the Mills administration over the payroll tax taking effect before companies that offer private leave programs are able to opt out.
A push to increase taxes on corporations and the wealthy
Sen. Mike Tipping (D-Orono), who is new to the Taxation Committee this session, said he needed more time to assess his stance on the tax proposals in the budget plan but has put forth his own legislation aimed at tax increases on the wealthy and corporations.
In addition to what’s in the budget, it’s equally important to look at what’s not in the budget, Tipping said.
“If things are so desperate that we’re looking at cutting health care and child care, desperately needed items, then we should at very least look at the tax breaks for corporations and the wealthy,” Tipping said.
The senator pointed to tax breaks that started under former Gov. Paul LePage for people making more than $200,000 per year as a policy the Legislature should consider changing instead.
President and CEO of the progressive Maine Center for Economic Policy, Garrett Martin, has similarly argued Mills’ budget proposal comes up short for workers and families. Martin is advocating for the state to change its tax brackets to help close the budget gap and retain programs on the chopping block.
“When the wealthy pay their fair share, we can ensure the people who care for our kids and older folks earn a wage they deserve,” Martin wrote in a statement.
MECEP is advocating for a “millionaire’s tax,” which it claims would raise more than $200 million in the next biennium.
However, last year Mills vetoed a proposal put forth by a Republican lawmaker that aimed to tax wealthy Mainers at higher rates.
MECEP also plans to push for raising the real estate transfer tax on higher priced homes, increasing the corporate income tax to raise close to $100 million, and ending subsidies for wealthy corporations.
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