AUGUSTA — Gov. Paul LePage has promised he would campaign against any lawmaker who opposes his efforts to reduce and eventually eliminate the state’s income tax.

But a tax-reform plan being offered by LePage’s Republican allies in the State House falls far short of the governor’s proposal, setting up the possibility that they will face LePage’s ire in 2016.

Based on a GOP document obtained by the Sun Journal on Thursday and in contrast to LePage’s proposal to reduce the state’s top income-tax rate from 7.95 percent to 5.75 percent, the Republican plan would reduce the top rate to 6.95 percent, a number that will likely move upward during negotiations with Democrats.

The tax plan is the final and stickiest part of a new two-year state budget that lawmakers on the Legislature’s budget-writing Appropriations Committee are in the process of negotiating.

Lead Republican lawmakers on the panel acknowledge they would be presenting a new proposal to their Democratic colleagues on Friday but would not go into details of the plan.

But besides the difference in the income-tax reduction, the Republican plan also deviates from LePage’s plan in several other places.

LePage’s plan eliminates approximately $62.5 million in state revenue-sharing with towns and cities starting in 2017, but the Republican plan looks like it not only maintains revenue-sharing, but increases it by about $2 million in 2017, bringing the total to more than $64 million.

Republicans also appear to disagree with LePage’s proposal to permanently increase the state’s sales tax from 5.5 percent to 6.5 percent and broaden it to include more services and goods. The Republican plan appears to leave most of the current sales-tax exemptions in place.

The state sales tax is currently set at 5.5 percent but is scheduled to return to 5.0 percent at the end of the state’s fiscal year on June 30. The Republican plan leaves the sales tax at 5.5 percent and does expand it to a broader range of goods and services but not to the extent the LePage plan does. Most professional services including those provided by lawyers, doctors and accountants remain sales tax free under the Republican plan.

LePage’s plan also reduces the sales tax on auto rentals from 10 percent to 8 percent while the Republican plan appears to keep that tax at 10 percent.  

LePage also seeks to reduce the current tax on meals and lodging from 8 percent to 6.5, percent while the Republican plan suggests increasing that tax to 9 percent.

While LePage’s proposal allows a sales-tax credit for lower-income individuals and families based on income, the Republican plan does not appear to include the same credit.

LePage’s plan also seeks to double a property-tax credit for homeowners over 65 while eliminating that program for younger homeowners. The Republican plan appears to keep the current program in place.

The Republican plan also leaves in place itemized income tax deductions, which the LePage plan eliminates.

The Republican proposal also appears to leave in place Maine’s estate tax, which LePage seeks to eliminate. Under the GOP proposal Maine’s estate tax would match the federal estate tax policy of exempting the first $5.5 million of an inheritance from taxes.

The Republican plan, shared anonymously as a spreadsheet marked confidential, is also dubbed the “TimberNut” plan, presumably for two Republican members of the Appropriations Committee: state Reps. Jeff Timberlake, R-Turner, and Robert Nutting, R-Oakland.

On Thursday, both the House and Senate co-chairs of the committee — one a Democrat and the other a Republican, said they believed their committee would produce a budget that could garner the two-thirds majority support it needs to become law over a LePage veto.

Over the past four months, state lawmakers on the Legislature’s budget-writing Appropriations Committee have been sorting through LePage’s budget proposal.

According to the co-chairs of the committee, state Rep. Peggy Rotundo, D-Lewiston, and state Sen. Jim Hamper, R-Oxford, the panel has done a good job of agreeing on how to spend the $6.57 billion in LePage’s proposed budget.

What the panel is now going to work on is how to pay for that spending in the form of revenue collections.

While Hamper wouldn’t discuss details of the soon-to-be released GOP plan, he did say the committee had several options to consider as it worked to produce a final budget between now and the end of June.

One option, Hamper said, is maintaining the state budget at its current level and with the current tax scheme. Because the state budget is currently operating in the black, lawmakers aren’t under pressure to devise a budget that either cuts spending or raises revenue significantly.

“As far as the budget process goes, we are in the last 10 days,” Hamper said, promising to have the panel’s work done by Memorial Day weekend. 

Rotundo also was optimistic that the committee would get its work done in a timely fashion. She said Democrats have three primary goals for the budget, including property-tax relief, equitable income-tax reductions and paying for all tax cuts and other programs, “not just in this budget, but in outgoing years,” Rotundo said.

She said that without a long-term plan to pay for the tax cuts being proposed, other important state-funded programs, including public education, would be subject to cuts in the future.

“We are at a standstill at this point,” Rotundo said Thursday, “waiting to see what our Republican colleagues want to do around tax reform, but we hope we will have that information soon because that’s a critical piece to being able to finish this budget.”

Still, Rotundo said, she believes the panel would get the job done because it has no other option.

Adrienne Bennett, a spokeswoman for LePage, said she wouldn’t be surprised to see lawmakers take every minute available to them to work out a final deal.

“This is a waiting game,” Bennett said prior to the details of the GOP plan being released. “The budget always comes down to the last minute, the 11th hour, and I wouldn’t be surprised to see it come down on the last day or one of the last days (of the lawmaking session).”

sthistle@sunjournal.com

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