AUGUSTA – Suggesting broader reductions could come in the future, Gov. John Baldacci called Friday for an immediate downward nudge to Maine’s highest income tax rate.
As expected, he also proposed a gradual elimination of the personal property tax on business equipment.
Saying Maine suffered from a high tax burden that he characterized as “this albatross around its neck,” Baldacci cast his proposal as a second phase follow-up to the earlier enactment this year of a school funding measure designed to curb local property taxes.
He also said his new plan could advance a drive to promote jobs and economic expansion.
Specifically, the governor’s plan calls for reducing the state’s top marginal income tax rate from 8.5 percent -higher than all but five states – to 8.45 percent.
Baldacci also urged an increase in low-income tax credit, saying such a step could move 40,000 people off the income tax rolls.
Beneficiaries of the proposed income tax changes would include not only individuals but more than 30,000 small businesses that pay taxes through the individual income tax, Baldacci said at a Cabinet Room news conference.
The governor said individual income tax rates could be reduced by 12 percent over 13 years.
To pay for the proposed income tax changes, the governor would suspend the indexing of individual income tax brackets for five years.
State Planning Officer Director Martha Freeman said revenue growth would be counted on in part to cover costs associated with the business equipment tax phase-out.
Among those looking on at the governor’s news conference were members of the Legislature’s Taxation Committee, which opened an informal session Friday morning with briefings from some of the sponsors of other tax overhaul plans that will be considered in the coming weeks.
Baldacci told news conference attendees, including business group representatives, State House lobbyists and other lawmakers, that he had considered but decided against including a local option sales tax initiative in his package.
The governor still appears open, however, to a review of such a measure by the Taxation panel.
Other tax proposals up for discussion include more sweeping plans, including one put forth by Sen. Joseph Perry, D-Bangor, and Rep. Richard Woodbury, an independent from Yarmouth, that would fix the state income tax at a flat 6 percent and lower the sales tax to 4 percent while broadly expanding it to include untaxed items including grocery staples, energy fuels and amusements.
AP-ES-04-29-05 1255EDT
Comments are no longer available on this story