One of the more important issues that remains for this Legislature to tackle, before adjournment in mid April, is conforming Maine’s tax code to the new federal tax code. Why is this so important?
Conforming Maine’s tax code with the federal tax code, which we have done for many decades, simplifies the filing process for all Mainers, including individual filers as well as small businesses. If we did not conform it would require Maine taxpayers to maintain two sets of records and books, as well as filing two separately distinct tax forms. Depreciation schedules, tax deductions, dividend and income all become different standards for filing.
Currently Maine relies of the federal forms to calculate Maine filer’s tax obligations to the state. We also rely on the federal review and audit process in order to make sure our filers are filing honest tax returns. If the IRS audits and finds deficiencies in a Mainer’s tax filings, Maine tax collectors are notified of the change in the filing status and the additional revenue collected. Without conformity Maine would either have to rely of the honesty of Maine filers or hire a whole new set of tax auditors to scan and review the thousands of tax returns.
Without tax conformity it is anticipated that Maine will realize a win fall in tax revenues of about $250 million dollars over the biennium budget cycle. That’s $250 million less that Maine taxpayers will have to spend and invest how they feel is best, not Maine State government. While there are those in Augusta that would prefer to have the additional dollars to create more government programs, I believe the current $7.1 billion dollar biennium budget is sufficient to meet Maine’s spending needs. In the four years that I have served in Augusta the biennium budget has gone from $6.2 billion to $7.1, a significant increase.
The current proposal before the Taxation Committee is to conform to the federal code, which would still realize a $118 million dollars in surplus, however the proposal also seeks to reduce the individual and small business income tax rates to make the conformity revenue neutral. The tax reduction plan would also take approximately 50,000 Mainers off the tax rolls altogether, providing real tax relief for those Maine families struggling to make ends meet.
Finally tax conformity will yield Maine a one-time tax bonus by aligning with the federal government’s repatriation provision where multi-national corporations will pay a one-time tax on all foreign owned property. Maine would receive an additional $31 million from this provision of the federal tax code. By not conforming it is unlikely that Maine would see any of this additional tax revenue from these multi-national companies.
All in all tax conformity provides a win win for Maine taxpayers and small businesses. Conforming now will allow for tax certainty going forward for the rest of this year. To wait until the next Legislature is seated in January 2019 would be too late for folks to properly plan for and file their taxes in a timely fashion.
Now is the time to conform. I hope my colleagues will agree.
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