It took all day March 11 and into early the next morning, but lawmakers last week finally came together on a supplemental budget.
The negotiations over the spending plan, which closes a gap in the state budget ending June 30, were harder than they needed to be, as minority Republicans did their best to muck it up.
Fortunately, legislative leaders kept their cool and kept working toward a deal. But if Republicans don’t change their strategy, the trouble passing the supplemental budget could foreshadow a unnecessarily wrought fight over the next two-year budget.
The sticking point on negotiations has centered around conforming state tax laws to federal policy regarding business loans from the COVID-related Payment Protection Program. While Republicans wanted Maine to follow the federal government in making the loans tax exempt, Gov. Janet Mills proposed treating it as taxable income – payroll and other allowable expenses were already deductible.
After Republicans blanched at the idea, Mills laid out a compromise in which the first $1 million of any PPP loan would be exempt from taxation. It brought benefits to 99 percent of eligible companies, leaving out only the very largest.
Still, this wasn’t enough for Republicans. Again, Democrats offered a compromise by way of full tax conformity on all loans, making the entirety of PPP loans tax exempt. The first $10,200 of unemployment benefits was also made exempt from state income taxes.
However, this also failed to gain any Republican votes. It took the late addition of funding related to veterans to get two Senate Republicans to defect and give the bill the two-thirds vote it needed.
But the bill hit snags in the House, where Republicans said they would only support a bill with full federal tax conformity – they wanted Maine law to match not only the COVID-related tax issues but also a number of prior Trump-era policies, including one that offers increased deductions for business meals and another that is geared toward large, multinational corporations.
That was news to Democrats – and just about everyone else who had been paying attention. If Republicans wanted full federal tax conformity all along – not solely for the PPP loans – they didn’t make that clear.
Ultimately, lawmakers agreed to add another $8 million to the state’s rainy day fund and study the impact of one of the GOP’s proposed tax breaks on Maine businesses.
The supplemental budget passed. But it shouldn’t have been that difficult. If Republicans are just as unclear or inconsistent about their goals in the coming negotiations over the next two-year budget, then that process could get disrupted too, taking valuable time and effort away from lawmakers who have a lot to do over the next few months.
Democrats control both chambers and the governor’s office. Republicans do not have the votes to amend the budget unilaterally – they can only band together to stop a two-thirds majority budget from passing altogether.
They could say no to everything the Democrats offer and hope that the other side folds under the pressure of the fiscal-year deadline. They’ve done it before.
But Maine would be better off if they work with majority Democrats in good faith to reach compromises that both sides can live with.
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