As we reported previously, on November 8, 2016, Maine voters narrowly approved the imposition of a 3% personal income tax surcharge on individuals earning over $200,000. The surcharge, which is effective for tax years beginning January 1, 2017, will be used to fund education.

Opponents of the 3% surcharge had requested that the vote be recounted because the measure passed with only just over 1% of the vote; however, on November 29, 2016, the request for recount was withdrawn. The recount petitioners cited cost vs. likeliness of success as the reason for withdrawing their request.

In a letter to the state legislature, Governor LePage urged legislators to consider the consequences of the additional surcharge (and the increase to the minimum wage) stating that they will "cause significant economic harm to restaurant workers, small businesses, successful people and our elderly."

He plans to include in his FY 2018 budget proposal a reduction in the income tax rate that would mitigate the effect of the surcharge.

He goes on to state:

"Punishing Maine people and small businesses by increasing their income tax by 42% will drive them out of our state and prevent badly needed professionals, such as doctors, dentists, engineers and scientists, from coming here. No one wants to come to a state that will confiscate over 10% of their earnings, especially when other states, such as our next-door neighbor New Hampshire, take none."

"Successful people and small business owners already pay a significant amount of property tax, income tax, excise tax, sales tax, payroll taxes and other taxes and fees. If they go out of business or leave the state and take their income with them, this will create even less revenue for schools and municipalities."

Governor also urges minimum wage increase be amended

The governor also asked the legislature to amend the minimum wage increase approved by voters to slow the increase rate to allow businesses more time to absorb the additional cost; remove the provision that increases the minimum wage every year after 2020 based on inflation; and restore the tip credit.

As we reported, the state minimum wage is scheduled to increase from the current $7.50 per hour to $9 per hour effective January 1, 2017; on January 1, 2018, to $10; on January 1, 2019, to $11; and on January 1, 2020, to $12. On each January 1 thereafter, the minimum wage will be increased based on inflation.

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