AUGUSTA — A bipartisan group of legislators plan to unveil a tax-reform package Wednesday they hope will stabilize revenues for the state while providing relief to income and property taxpayers.

The so-called “Gang of 11” has worked quietly behind the scenes for months on the proposal, said Rep. Gary Knight, R-Livermore Falls, a member of the group.

Knight said the bill tackles a vastly antiquated tax system and would put Maine on the map in terms of state tax reform.

Knight said he and Sen. Dick Woodbury, a Yarmouth independent, began working on the issue last year. Among other things, the proposal creates a flat-rate income tax system while bumping the state’s sales tax.

Knight and Rep. Lance Harvell, R-Farmington, also a member of the group, said the measure is a response to a state budget that’s in crisis year after year.

Knight, who chairs the Legislature’s moderate caucus, said it’s the first bipartisan tax bill he’s seen in his seven years in office, and it aims to even the legs of Maine’s “three-legged tax stool.”

“We have very high property taxes and very high income taxes and very low consumption taxes,” Knight said. “So you’ve got two very tall legs and one very short and all out of proportion to what they should be.”

According to a one-page primer on the bill, Maine’s income tax rate would be set at 4 percent for all wage earners. The bill also creates a homestead exemption on the first $50,000 of assessed property value and eliminates the state’s estate tax.

The bill also would drop the state’s corporate tax rate from 8.93 percent to 7.5 percent, but it would expand the items on which the state can collect sales taxes.

“The sales tax base is expanded to apply to nearly all consumer purchases with the exception of health care and education,” according to the document.

The measure, according to supporters, is not only aimed at creating a more balanced tax system, it also provides an incentive for more people to make Maine their primary residence.

“The whole concept of this bill is to take care of the folks who are working here 12 months a year,” Knight said.

While Gov. Paul LePage’s press secretary said the governor is reserving comment on the bill, Knight said members of the Gang of 11 have met with LePage and he was “open-minded on it.”

“We can’t comment until it’s publicly released,” LePage spokeswoman Adrienne Bennett said. “The details could have changed from one day to the next.”

Knight said the group is composed of state lawmakers who were willing to check partisan politics at the door to work on meaningful tax reform.

“These are people who believe it isn’t about Democrats or Republicans; this is about doing what’s right for everybody,” Knight said.

He said the work was kept largely under the radar so various special-interest groups would not be able to lobby against it too prematurely. He said disclosure of the group’s efforts would have enabled some to “chip away at it.”

Senate President Justin Alfond, D-Portland, said the package goes a long way toward answering LePage’s call for legislators — particularly Democrats — to come up with solutions if they don’t like elements of his biennial budget proposal.

Among the more hotly contested concepts in the budget bill is a proposal to suspend an estimated $200 million in municipal revenue-sharing, reduce property tax exemption programs, flat-fund subsidies for public schools and pass half of the cost of teacher retirements from the state to the local level.

Sen. Emily Cain, D-Orono, said Maine is long overdue for an overhaul of its tax system. She is a member of the Gang of 11 and one of two members of the budget-writing Appropriations Committee.

“This is really about modernizing and simplifying the tax code,” Cain said. “We want to reduce income and property tax burdens on Maine residents to try to relieve some of the pressure on household budgets and really focus on a pro-growth approach to economic development.”

It’s also about ensuring a more stable source of revenues for the state so Maine’s tax collections aren’t as sensitive to economic swings.

“A key element for us is not to have a short-term, Band-Aid approach,” Cain said. “The governor’s budget is full of challenges, and it really has inspired a much bigger conversation around the tax code in Maine.”

Alfond said he expects the reforms to result in more revenue for the state that could be used to offset some elements of LePage’s budget proposal.

He said it also shows that on some goals, Republicans and Democrats aren’t so far apart.

“This is an example of Republicans, Democrats and an independent coming together to fix a pressing issue, which is the state’s tax code,” Alfond said. “If you don’t foster that environment, this doesn’t happen.”

Bennett said tax increases could be a problem for LePage.

“It’s no secret that the governor is not a proponent of tax hikes,” she said. “He proposed a balanced budget and now it’s the Legislature’s responsibility to come up with alternatives if what he proposed is not acceptable to them.”

Bennett said Democrats in the Legislature had yet to produce their own plan for solving the state’s estimated $800 million budget shortfall.

“We’ll see if this is the only solution that comes forward,” Bennett said of the Gang of 11’s plan.

Other members of the Gang of 11 include Senate Democratic Leader Seth Goodall of Richmond; Assistant Senate Republican Leader Roger Katz of Augusta; Rep. Mark Dion, D-Portland; Rep. Amy Volk, R-Scarborough; Rep. Lance Harvell, R-Farmington; Rep. Nate Libby, D-Lewiston; and Rep. Sara Gideon, D-Freeport.

Matthew Stone and Chris Cousins of the Bangor Daily News contributed to this report.


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