AUGUSTA – Governor Janet Mills pushed Maine legislation against minority Republicans Thursday after they refused to vote to propose an additional budget bill that would bring state tax breaks to thousands of businesses and unemployed workers.
“Failure to pass this sane budget is a loss to Maine,” Mills, a Democrat, said in a prepared statement late Thursday afternoon. “It is a loss to our unemployed and to 28,000 small business owners who would receive tax breaks but now have to wonder what will happen next.”
After the bill was not two-thirds backed by a vote between 83 and 63, the House resigned around 6:30 p.m. and was due to return to ongoing deliberations at 8:00 p.m.
The game of chess is brave for Republicans risking over $ 100 million in tax breaks for thousands of businesses and taking a move that is likely to catch the fire of Maine’s business world.
Dana Connors, president of the Maine State Chamber of Commerce, the state’s largest corporate organization, said choosing between full PPP compliance and no relief at all was not an option for its members.
“The relapse should always have consisted of protecting full PPP compliance, as had already been agreed non-partisan,” Connors said late on Thursday. He added that full PPP compliance was the primary concern and top priority of the state Chamber of Commerce. Connors hopes Republicans will find a way to compromise as the sharp split over a supplementary budget is not good as lawmakers try to negotiate the state’s next full two-year budget, due by June 30.
Mills said the House Republicans took an “all or nothing” approach and encouraged them to “abandon their last-minute attempt to give state tax breaks to large multistate, multinational corporations.” … ”
The legislation, stuck in an impasse late Thursday, is set to close a projected revenue shortfall of around $ 125 million in the state’s current fiscal year ending June 30, but it also includes the tax breaks for businesses and the unemployed.
The Maine Constitution also requires the state government to maintain a balanced budget or be forced to close.
If two-thirds support for the bill is not granted in both chambers, the measure cannot come into effect in time for the tax date on April 15. This could result in an additional tax expense for more than 28,000 Maine businesses that benefit from the federal paycheck protection program passed by Congress in 2020 as the pandemic hit the nation.
The impasse also means that the unemployed Mainer would count 100 percent of the unemployment benefit they received in 2020 as income and would have to pay taxes on it. While many unemployed people, around two-thirds of them, have already allowed the state to withhold taxes on these benefits, the rest have not.
A total of 160,000 people who received unemployment benefits would be entitled to a tax cut under the supplementary budget.
“The ability to compromise – abandoning an all-or-nothing approach and negotiating in good faith to reach reasonable solutions – is a key part of governance,” Mills said in a prepared statement. “My administration did just that, along with Republicans in the Senate and Democrats in both houses. The Republicans of the House of Representatives can work with us to reach a meaningful compromise for the people of Maine and Maine businesses.
The entire legislature met in person for only the second time since the ceremony last December. They will meet at the Augusta Civic Center – a larger venue that allows lawmakers to socially distance themselves to prevent the spread of the COVID-19 virus. However, the venue and the pandemic also put additional pressure on lawmakers as the municipal civic center is set to reopen as a mass vaccination site for Maine General Health on Friday.
The facility also cost lawmakers about $ 21,000 per day to use the facility.
Democrats could have pushed through a supplementary majority budget on Thursday allowing state income tax credits as an alternative approach in 2021, but businesses and workers would still have been on the hook to pay income taxes on PPP funds and full unemployment benefits this year. A majority-only bill would also come into force 90 days after the legislature was adjourned, likely sometime in June.
As approved late Thursday, the bill extends an initial proposal by Mills that would have exempted the first $ 1 million in PPP funds a company received from state corporate income tax. Instead, the bill exempts all PPP funds from state income tax, similar to a provision in the federal tax law passed by Congress in late December 2020. This expansion cost the state approximately $ 100 million in tax revenue, while providing an income tax exemption for the state.The first $ 10,200 in unemployment benefits in 2020 will cost an additional $ 47 million.
These two provisions of the bill received bipartisan support in the legislature’s budget and finance committee, but ultimately the committee’s five Republicans voted against the final partisan-splitting package on the bill.
Republican leaders have denied claims that they changed their demands in negotiations, claiming that they had sought full compliance with federal tax law since the January legislative session began. But the Democrats said the Republicans are only pushing for full compliance of the PPP funds, and when the Democrats agreed to that concession, the Republicans expanded their demands.
Other declarations of conformity that Republicans have requested include matching under federal law, which allows businesses to deduct 100 percent of the cost of business-related meal expenses, and matching the federal government to overseas intangible income that comes from exporting products to Intangible assets are tied to such as patents, trademarks and copyrights that are held in the United States.
In 2017, the Federal Law on Tax Reduction and Employment introduced a uniform corporate tax rate of 21 percent, but also lowered the tax rate for intangible income from abroad from 21 percent to 13.125 percent. This tax rate will increase to 16.83 percent in 2026. Extending these tax breaks in state law would cost Maine an additional $ 32 million.
The widening of the meal allowance was derided by Jackson and other Democratic leaders as a “three-martini lunch” write-off. But Republicans have said that many Maine companies have incurred increased business lunches as they fed their employees to keep them in work during the pandemic. The overseas intangible income change affects only about 200 companies that pay corporate taxes in Maine, and only about 10 of those are state residents, the Maine Revenue Service told the Senate. Without the change, these companies would pay about $ 8.3 million more in state income taxes in 2020.
Republicans, however, found it difficult to identify which companies would benefit from the postponement if pushed to do so by their own colleague, Senator Rick Bennett, R-Oxford late Wednesday night.
Bennett and Senator Brad Farrin, R-Norridgewock, later joined Senate Democrats in advancing Bill 24-10 after Democrats agreed to add an additional $ 113,000 to the bill for a position as homeless veterans coordinator, considered a cost-saving Measure had been cut in the supplementary budget proposed by Mills.
U.S. State Senator Cathy Breen, D-Falmouth, who is Senate Chairwoman of the Budget Committee on Funds and Finance, said Majority Democrats met their Republican counterparts more than halfway in negotiating a fair deal and renewed the offer this week They agreed to put the homeless veterans coordinator back into the budget.
Jeff Timberlake, chairman of the Senate minority, R-Turner, said Republicans had said they wanted full state compliance with federal law. A move, said House spokesman Ryan Fecteau, D-Biddeford, is unlikely as many of these changes would allow individuals and businesses to modify tax returns for income made long before the pandemic broke out in 2018 and 2019 .
An additional $ 6 billion in federal aid based on the US $ 1.9 trillion bailout plan approved by Congress on Wednesday and signed by President Biden on Thursday is expected to flow into Maine in the coming weeks.
Republicans had also urged Democrats to approve a move that would require all federal funds spent by the state government to be approved by two-thirds of the legislature’s vote. However, that demand seemed to fall by the wayside as negotiations continued on Wednesday and Thursday.
While much of the new federal funding will go directly to Maine citizens in the form of cash payments of $ 1,400 or a $ 300 unemployment benefit extension, state and local authorities are expected to provide new federal grants of 1.2% received up to $ 1.7 billion. What role the legislature will play in allocating these funds remains unclear.
This story will be updated.
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