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Politics

Gov. LePage's Efforts to Conform to Federal Tax Code Run Into Snag

AUGUSTA, Maine - Because income taxes in Maine are linked to federal tax returns, the Legislature has to decide every year whether to adopt any changes to the federal code that would have an impact here.

This year’s changes, if approved, would save the state nearly $17 million. But there is opposition to the most costly provision of the measure, and Gov. Paul LePage says he is willing to reconsider it.  

At issue is something called "bonus depreciation," a section of federal tax law that allows companies and individuals to write off the cost of certain equipment they acquire.

Maine grants the tax write-off to equipment used in the state through what is called the Maine capital investment credit. It costs more than $10 million, and would be made retroactive to tax year 2014.

Ben Gilman, of the Maine State Chamber of Commerce, expressed support for the measure in testimony before the Legislature’s Taxation and Appropriations committees.

"The Maine capital investment credit is an economic stimulus measure to encourage companies to invest sooner in slow economic times to allow companies to take depreciation on equipment faster than they normally would be allowed," Gilman said. "This has been an effective tool in Maine."

But  Portland Rep. Matthew Moonen, a Democrat who sits on the Taxation Committee, questioned Finance Commissioner Richard Rosen on why Maine should adopt the change, and reward companies after the fact.

"Why should we do this for an investment that these companies made with the understanding, at the time they made them, that the tax credits had expired?" Moonen said.

"I think, fundamentally, it is a competitive posture question," Rosen responded. "It is the competitiveness of the state of Maine compared to other states."

Joel Johnson, an economist with the Maine Center for Economic Policy, is among those opposed to the capital investment tax credit. "We just think this is a costly, ineffective, unnecessary tax give away to mostly big businesses, multi-state large businesses that are doing business here in Maine," Johnson said.

And Ben Chin, of the Maine People’s Alliance, says the price tag on the measure is significant compared to other critical programs, and creates a major policy decision.

"The entire General Fund portion of the General Assistance program is about $12 million, so that’s the order of magnitude of money that we are talking about," he said.

Gov. LePage says he is willing to reconsider that provision of his tax conformity legislation, if an accurate case is made against it. "I’ll look at it - I’m - I’ll look at it, if it is," he says. "We want help from out-of-staters to help pay our tax bills, so we’ll take a look at it."

He says if lawmakers have a better way to handle the tax conformity issue, he is willing to talk about proposed changes. "Everything is on the table and we are hoping to make it better, and better for Maine," he says, "so we are certainly going to do that."

The legislation is on a fast track because the tax filing season is already underway and some taxpayers are delaying filing returns until they know whether the state will conform to the federal changes.

Sen. Jim Hamper, a Republican from Oxford co-chairs the Appropriations Committee. He says he wants to hear what the the Taxation Committee has to say before deciding whether to approve the measure.

"Quite honestly I don’t have a reaction at this state of the game," Hamper says. "I am kind of curious to see what sort of recommendation they give us. And I need to talk to others in my party as to what we are going to do."

The two committees hope to have a final proposal before the Legislature within the next few weeks.

Editor's Note: A previous version of this story attributed the exchange with Maine Finance Commissioner Richard Rosen to Rep. Adam Goode. It was actually Rep. Matthew Moonen, not Rep. Goode, questioning Commissioner Rosen.