Maine lawmakers work late to reach deal over tax cuts
(The Center Square) – A plan to exempt thousands of Maine businesses from state taxes on federal disaster loans was approved late Thursday after legislative leaders reached a deal on a supplemental budget.
House Republicans agreed to put aside demands for more tax cuts hours after late night talks with Democratic leaders produced an agreement on the $258 million spending package. Republican support was crucial for the two-thirds majority needed to approve the spending bill. An earlier version of the budget had been voted down on Thursday.
The supplemental budget, which is meant to keep the state running until July, included key provisions to eliminate state taxes on the federal Paycheck Protection Program for more than 28,000 small businesses that received the disaster loans and exempt the first $10,200 of federal unemployment benefits received last year by jobless workers from state income taxes.
Democrats and Republicans reached an earlier agreement to include about 250 businesses that weren’t covered by the tax exemption plan. The state Senate signed off on the compromise bill on Wednesday. But House Republicans voted down the plan Thursday after they failed to win concessions on several other changes to the state tax code to provide more relief.
Gov. Janet Mills, who on Thursday ripped Republicans for rejecting the budget, a day later praised them for coming to an agreement. She had warned that the impasse jeopardized business and taxpayers with the tax filing deadlines approaching.
“I commend both Democratic and Republican leadership for acting last night to reach a sensible, bipartisan agreement,” Mills said in a statement on Friday. “As a result of this compromise, 160,000 unemployed Maine people and 28,000 Maine businesses that received PPP funds will receive important tax relief.”
House Republicans heralded approval of the budget deal as a win for the taxpayers and businesses struggling amid the ongoing impact of the pandemic.
“Maine employers and their employees rallied to our call and convinced the Governor and Democrats in the legislature to see the wisdom of supporting the people who will lead our economic recovery,” House Republican Leader Kathleen Dillingham, R-Oxford, said in a statement. “In the end we commend our Democratic colleagues, the leadership of Speaker Fecteau, and his willingness to listen to achieve a bipartisan result.”
More than 28,000 Maine businesses received about $2.2 billion through the first round of the loan program, according to data from the U.S. Treasury.
Congress exempted forgiven PPP loans from federal taxes, but Maine is one of 18 states where loans were to be taxed, according to the Washington, D.C.-based Tax Foundation.
Exempting businesses that received PPP loans will cost the state about $100 million in the lost tax revenue, according to state revenue officials. The unemployment benefits tax exemption provision will cost the state about $47 million.
House Republicans said they plan to file a tax exemption proposal similar to the unemployment exemption that will provide tax relief to other taxpayers.
Rep. Sawin Millett, R-Waterford, said tax breaks should be offered to grocery store workers, teachers, health care workers and others who remained on the front lines during the pandemic.
“We are all in this together and our tax policy, going into the biennial budget, needs to reflect that important reality,” he said in a statement.
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