Halfway through fiscal year 2014, the latest available data from the State Controller shows that general fund income tax revenue is down 3.2% ($22 million) compared to the first six months of FY 2013. After adjusting for inflation, income tax revenue this year is on pace to be lower than fourteen years ago, at the top of the stock bubble in 2000 and 2001.
This year’s decline in income tax revenue, which is the result of income tax cuts passed in 2011, is more than offset thus far by regressive sales tax increases. Sales tax revenue is up 10.6% ($46.1 million) compared to the first six months of last year, due mostly to the increase in the general sales tax rate from 5% to 5.5% and the increase in the meals and lodging tax rate from 7% to 8%. These sales tax increases hit low-income families harder than high-income families.
But the more depressing line item in the controller’s report is the large increase in revenue created by the elimination of targeted property tax relief for low-income Mainers. Six months into the fiscal year, “transfers for property tax relief programs” have paid out $35 million less than they did at the same point last year. The vast majority of this money would have gone to low-income Maine families struggling to pay the bills—especially seniors on fixed incomes—if legislators hadn’t callously eliminated the “circuit breaker” program during budget negotiations last June.
Low- and middle-income Mainers already paid more state and local taxes as a percent of their income than the richest 1% of Mainers, before all of these recent changes took effect. Unfortunately, the latest controller’s report confirms that the net effect of all these recent tax changes is regressive (PDF). Low-income Mainers, especially seniors, are paying to cover the cost of fiscally reckless income tax cuts, 60% of which accrue to the top 20% of Maine taxpayers.
