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LePage Says He'll Propose Paying for Tax Cuts with Spending Reductions

AUGUSTA, Maine - Gov. Paul LePage says he'll pursue cutting the state's income tax in next budget plan, but he won't raise the sales tax to pay for it.

The governor told WVOM Radio in Bangor that a reduction in the income tax will have to be paid for with spending cuts.

"I am not going to propose anything for increasing taxes on the sales side," LePage said. "I am going to do everything that I can to lower the top marginal rate. I just don't know how much cutting has to be done."

LePage's statement is a departure from previous signals about his incoming budget and tax proposal. Many at the State House expected the governor to propose a tax plan similar to the one rejected by lawmakers two years ago.

But LePage says resistance to raising the sales tax in the Republican-controlled Senate has forced him to explore other options.

LePage did not specify where he plans to cut spending and he did not discuss other ways that he could pay for an income tax cut, such as broadening the sales tax to include currently excluded goods and services, or raising taxes on meals and lodging.

The governor proposed some broadening of the sales tax base in the budget he passed two years ago. He also proposed taxing nonprofit organizations.

Most of his proposals were jettisoned by the Legislature, although lawmakers did lower the top income tax rate to 7.15 percent for a single filer and the income threshold to $37,501. Lawmakers did it by making permanent a temporary sales tax increase from 2013 to hold the rate at 5.5 percent and raising meals and lodging taxes from 8 percent to 9 percent.

LePage has vowed to further reduce the top marginal rate, which applies to those earning $50,001 or more. He has also discussed eliminating the income tax altogether. But achieving those goals has proven difficult. The income tax represents approximately $1.5 billion in annual revenue to the state. The current two-year budget is approximately $6.7 billion.

The governor will propose his budget in January. It is then vetted by the Legislature, which can vote in changes to the proposal or craft its own spending plan.