Income Tax Reform Repealed by Referendum in Maine (last paragraph corrected)

June 9, 2010

In a blow to state income tax reform, Maine voters threw out the tax reform enacted last year. As a result of Tuesday’s referendum, single wage earners with more than $10,050 in taxable income will pay a higher income tax rate. Couples with more than $20,100 in taxable income will pay at a higher rate.

Income Tax Rates
Before the Referendum*

Income Tax Rates‡
After the Referendum

6.5% > $0*

2% > $0

6.85% > $250,000

4.5% > $5,050

7% > $10,050

8.5% > $20,150

* An increase in the standard deduction assured that no income taxpayer would pay more under the 2-rate system.
‡ Brackets shown for singles; they double for couples.

The retail and housing sectors led the successful campaign to abolish the new law and restore the tax breaks that they had enjoyed before enactment of tax reform. The income tax rate cuts had been financed by extending the sales tax to previously untaxed services, raising the sales tax rate on lodging and meals, and eliminating the state-level mortgage interest deduction.

Maine’s top tax rate will now revert from 6.85 percent (18th highest in the nation) to 8.5 percent (9th highest).

BusinessWeek reported that the successful YES campaign for repeal was supported by a group called Save the Mortgage Interest Deduction which raised $222,589. The unsuccessful NO campaign to keep the income tax reform was supported by the Maine Chamber of Commerce and a political action committee called No Higher Taxes for Maine which raised $337,180 including $25,000 from Leon Gorman, chairman of famed retailer L.L. Bean.

Also see: Maine Rejects Tax Reform Measure

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