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Maine Lawmakers Take Sides Over Conforming to Federal Tax Changes

AUGUSTA, Maine — The Legislature is divided over how to cover millions of dollars in lost income tax revenues that are expected from the state’s decision to conform with federal tax law.

The two parties — and several committees — are at odds, and the battle is now headed to the floor.

The rhetoric in both committees this week has at times been heated. The basic disagreement is whether the state should conform its tax policies for both 2015 and 2016 to federal changes adopted by Congress in December. Democrats want to decide on 2016 later, and only conform for 2015, so that Mainers can file their taxes.

“We’ve got lots of new bills on the table, we’ve got old bills on the table, we’ve got bills that will be coming from commissions like the veterans commission,” says Rep. Peggy Rotundo, a Democrat from Lewiston.

The cost for conformity for just 2015 is about $17 million, and Rotundo says there will be other bills to pay for this session, from salary hikes for state law enforcement officers to costs associated with fixing problems at the Riverview Psychiatric Center and responding to the state’s drug crisis.

“We just have a lot of other priorities that we might need to fund and we don’t yet know what those are,” she says.

But Republicans argue that Congress has finally acted to make permanent some tax breaks that particularly benefit small businesses, and believe that Maine should fund conformity for both years at a cost of $38 million.

“My colleagues on the other side of the aisle don’t seem to understand how important it is for somebody who is trying to grow a business to commit to purchasing equipment,” says Republican Rep. Tom Winsor from Norway. “We want them to grow their business, we want them to hire more people and that takes capital money.”

Winsor says that by allowing the faster depreciation of equipment on their taxes, businesses realize more money to invest. But Sen. Linda Valentino, a Democrat from Saco, took umbrage at his comments.

“The statement that Rep. Winsor said — that our side of the aisle, we don’t understand the complexity of business decisions — questions my motive and my decision and I take exception to that,” she says.

She says the state has only conformed to federal tax changes on a year-to-year basis because of the principle that one Legislature cannot bind another Legislature to follow any particular course of action.

Rep. Jeff Timberlake, a Republican from Turner, says setting Maine tax policy for the rest of the current two-year budget cycle is good public policy.

“We agree to disagree, and that is going to happen, I can take that, but I am going to stick to my guns,” he says.

The debate is likely to be echoed in both the House and Senate in the days ahead.

Legislative leaders want to adopt tax conformity legislation this week so the more than 100,000 taxpayers affected by the various tax breaks can file their 2015 tax returns.

Journalist Mal Leary spearheads Maine Public's news coverage of politics and government and is based at the State House.