When a state’s budget fully invests in its people and communities, everyone benefits. Today, Maine has a surplus and policymakers have an opportunity to improve people’s lives, get our economy back on track, and help the workers, families, and small businesses hit hardest by the COVID-19 pandemic.
The Maine legislature’s budget committee is set to begin assessing Governor Mills’ proposal to spend the state’s projected $820 million in surplus revenues. The plan includes routine initiatives such as maintaining Maine’s commitment to funding 55 percent of K-12 education costs and some innovative investments in workers including free community college for high school graduates and wage subsidies for childcare workers — as well as a massive $411 million payment to 80 percent of Maine taxpayers.
While much of the proposal aims to help Mainers and service providers with higher costs of goods and materials, the dedication of half the available revenues to a taxpayer rebate overlooks many unmet needs. Getting cash to households, particularly those with low income, is important to assist families with increasing costs of food, fuel, housing, and more, but there are better ways to target Mainers who need help the most and to build a stronger economy now and in the future.
A one-year increase of the state’s sales tax fairness credit by $500 would cost only $160 million while delivering the same benefit to individuals and families with the greatest need. Doing so alongside making the state’s $300 child credit refundable, a policy that costs $23 million per year, would ensure low-income families with children get more relief and would free up more resources to support vital services and the workers who provide them1 through programs and services including:
- Paid family and medical leave program start-up costs
- Restoration of MaineCare coverage for immigrants
- Expansion of health insurance and mental health services for children
- Raises for state workers who make an average of 15 percent less than their counterparts in the private sector
- Expanded access to housing vouchers so more families have a safe, stable place to live
- Increased reimbursement rates for behavioral health providers which help improve wages for this vital work force and improve availability of services to Mainers in need
- Full cost of living adjustment for retired state workers and teachers
Gov. Mills takes this more targeted approach in her plan to expand the earned income tax credit and the property tax fairness credit. Together, these proposals boost incomes for families with low and moderate incomes by hundreds of dollars each year yet cost a fraction of the one-time payments the governor has proposed.
- Doubling the state’s earned income tax credit, a refundable tax credit for working households with incomes up to $59,000, would increase the maximum credit for a family with three children from $832 to $1,733 and for single filers from $140 to $280 when Mainers file their taxes next spring.
- Expanding the state’s income tax credit for high property and rent costs would increase the property tax fairness credit for qualifying individuals from $750 to $1,000 for people under 65 and from $1,200 to $1,500 for those 65 and over.
Spending the state’s historic surplus in a manner more targeted than one-time cash payments would create the most lasting impact on Maine’s workers, health care sector, and communities while ensuring households with low income and older Mainers on fixed incomes get help with rising costs.
Notes:
[1] Analysis provided by the Institute on Taxation and Economic Policy, February 2022
