Effort to undo LePage’s estate tax cut for millionaires returns to Augusta
A sign held in front of the portrait of Gov. Paul LePage during a tax fairness rally at the Maine State House in 2019. | Beacon
AUGUSTA, Maine — A state lawmaker wants to repeal the LePage-era tax cuts on Maine’s wealthiest estates to help fund the state’s urgent need for housing.
It is not the first time Rep. Ben Collings, a Democrat representing Portland in his fourth term, has introduced legislation to amend Maine’s estate tax.
“I’ve submitted this bill, I think it’s my third or fourth session, so it’s become perennial,” he told the legislature’s Taxation Committee in a public hearing on Wednesday.
Collings told the committee about the origins of the estate tax, first established at the federal level by President Theodore Roosevelt to fight against oligarchy — the rule of the wealthy. “One of his concerns at the time was the great amount of wealth concentrated into a few hands. He thought that was dangerous,” Collings said.
Passing tax reform measures in the Maine Legislature, which Democrats have controlled since 2018, has been complicated by Gov. Janet Mills’ repeated pledge not to raise taxes, even on the wealthy, who reaped major benefits from tax cuts implemented by former Gov. Paul LePage.
Over the course of his administration, the Republican governor drastically shrank taxes on inherited wealth, which he referred to as a “death tax.” Starting in 2012, he and GOP lawmakers raised the estate tax threshold, below which the estate tax does not apply, from $1 million to $5.6 million for individuals or $11.2 million for joint estates of married couples.
Economists say those tax cuts have increased inequality, which spiked during the pandemic.
Between 1973 and 2015, according to the Maine Center for Economic Policy, the top 1% of Maine families captured 42% of all income growth, leaving just 57% for the remaining 99% of Mainers. Income inequality is correlated with inequality in wealth. Wealth inequality is 10 times more concentrated than income inequality.
“A staggering 60% of household wealth in the United States is owned through inheritance rather than direct labor,” said Maura Pillsbury, MECEP’s state and local tax analyst, adding that just 20 estates were taxed in Maine in 2021 under the existing threshold.
“Wealth for the poorest 10% of Americans has actually declined over the past 50 years and racial disparities in wealth today are as stark as they were in 1963,” she said. “White family wealth is seven times greater than Black family wealth and five times greater than that of Hispanic families.”
Collings’ legislation, LD 1338, would lower the threshold to estates worth more than $2 million. Conservatives and anti-tax advocates often portray the estate tax as an attack on small family farms that are passed down through the generations. Collings’ proposal would exclude inherited property used for heritage industries like farming, fishing and logging valued less than $3.8 million.
“Very wealthy people have used this narrative, that we were going to drive small farms and small businesses out of business, to advance their own agenda,” Collings said.
The increased revenue netted by the change would go to MaineHousing, the state’s housing authority, which builds affordable housing and refurbishes dilapidated housing through tax incentives, such as the Low-Income Housing Credit Program. The bill stipulates that 25% of revenue go to housing for veterans.
This aligns with other Democratic priorities, as the party’s leaders hope to increase funding for MaineHousing in a supplemental budget they intend to pass this summer. There is currently a shortage of over 20,000 affordable housing units in the state.
The Maine State Chamber of Commerce and Professional Logging Contractors of Maine testified in opposition to the Collings’ bill on Wednesday, saying the estate tax would hurt small businesses.
“This bill does punish the hard work and success of Mainers,” said the chamber’s vice president of advocacy Linda Caprara.
Collings pushed back against conservative characterizations of the estate tax, specifically that it was a tax on wealth that has already been levied by income and property taxes.
“Sometimes you’ll hear that this is double taxation,” he said. “But the facts are, the largest estates are comprised mostly of unrealized capital gains that have never been taxed. The estate tax is one of the only means of taxing that wealth.”
Collings’ bill is a major priority for progressives groups seeking to inject more fairness into the state’s tax code by having the wealthiest Mainers pay higher taxes to lessen the burden on middle- and low-income property taxpayers. More revenue is desperately needed, progressives say, to fund critical issues such as housing, social support services, healthcare, child care and other important priorities.
Another priority is LD 667, which Collings introduced earlier this year, which would establish a surcharge of 3% on income in excess of $1 million and a 6% surcharge on income in excess of $10 million. The bill would require that 75% of the revenue generated from the measure go to funding K-12 education and 25% of the funds be spent on rural economic development.
A bill to create a new top income tax bracket in Maine with a tax rate of 11.15% was voted down by the Taxation Committee in April.
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