AUGUSTA – Governor Janet Mills pushed against minority Republicans in the Maine legislature Thursday after they refused to endorse 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.”
The bill, which would exempt loans from the federal paycheck protection program from state taxes, was not supported by two-thirds in a vote of 83 to 63 votes in parliament. Legislators took a two-hour break around 6.30 p.m. but didn’t return until 10.15 p.m.
Exempting PPP loans from state taxes would save the 28,000 companies around $ 100 million.
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.
Mills said House Republicans were taking an “all or nothing” approach, encouraging 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.
The legislature also faces a deadline. While the federal tax deadline is April 15, corporate tax returns must be filed with the state by Monday. Without a final decision by then, many Maine taxpayers will likely be forced to file extensions of their tax returns.
The supplementary budget would also exempt up to $ 10,200 from state taxes on unemployment benefits. If the measure fails, the 160,000 Mainers who have received unemployment would have to count 100 percent of the unemployment benefit they received in 2020 as income and pay state taxes on it.
“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 is only meeting in person for the second time since it held ceremonies 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 pandemic are also putting 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 costs lawmakers approximately $ 21,000 per day to use the facility.
As approved by the Senate late Wednesday, the amendment bill expands an initial proposal by Mills that would have exempted the first $ 1 million PPP funding a company received from state corporation 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 December. This expansion will cost the state about $ 100 million in tax revenue, and unemployment benefit exemption, which will be paid 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 been calling for include amending federal law to allow businesses to deduct 100 percent of the cost of business-related meals, as well as foreign-sourced intangible income derived from the export of products that become intangible are bound, such as B. Patents. US trademarks and copyrights.
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 has been ridiculed by Senate President Troy Jackson, D-Allagash and other Democratic leaders as a write-off of “three martini lunches”.
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.
Jeff Timberlake, Senate Minority Chairman, R-Turner, said Republicans wanted full state compliance with federal tax law.
House spokesman Ryan Fecteau, D-Biddeford, said this would allow individuals and businesses to amend tax returns for income earned long before the 2018 and 2019 pandemic broke out.
With their votes on Thursday, Republicans turned their backs on Maine businesses, Fecteau said.
“These are the companies that have received PPP loans in my community. These are the companies we know. These are people who gave blood, sweat and tears to survive the pandemic, ”said Fecteau. “This was a vote on whether we would be with them. The Republicans did not stand by their side. “
This story will be updated.
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