AUGUSTA – A partisan deadlock over a budget bill could force thousands of Maine businesses and unemployed to pay state taxes on federal pandemic benefits.
Under the leadership of majority Democrats, the Legislature’s Committee on Resources and Finances approved the supplementary budget law on Thursday evening in a vote between 8 and 5 parties.
The bill would exempt all businesses from state taxes on forgivable loans under the Federal Payroll Protection Act received in 2020. In addition, an estimated 160,000 unemployed Mainers would receive state tax exemptions of up to $ 10,001 in unemployment benefits.
The bill extends a proposal by Democratic Governor Janet Mills that only state income taxes would have been imposed on profitable companies that have received more than $ 1 million in PPP funding.
House and Senate Democratic leaders said Friday they met Republicans more than halfway, but GOP lawmakers refused to endorse them.
This means that it may fail as it will require a two-thirds majority to pass the bill before April 15th. All lawmakers will review the bill next week when it meets for the second time this year in a COVID-19 session at the Augusta Civic Center.
Republicans are pushing for full federal tax compliance, including provisions that allow businesses to deduct 100 percent of business lunch expenses and take advantage of other federal deductions. Republicans also want the law changed to give them more control over how additional federal COVID aid money is spent, by requiring a two-thirds majority to approve such spending.
“We took the idea that the federal government has recognized the difficult situation for employers of all types and sizes in 2020 and made adjustments to help them keep their employees and stay afloat and not fall by the wayside, when the customers leave, “he said Rep. Sawin Millett, R-Waterford, the House’s top Republican on the Budgets Committee.
But top Democrats denied the Republican arguments.
“While the Democrats want to devote resources to helping families in Maine, Republicans would prefer to offer generous tax breaks that pave the way for three-martini luncheon amortization,” Senate President Troy Jackson, D-Allagash, said during an online press conference on Friday morning.
Senator Cathy Breen, D-Falmouth, chair of the committee’s Senate, said Republicans appeared poised to put tax breaks at risk for thousands of workers and businesses in order to expand tax breaks for a relatively small segment of businesses.
Democrats listened, she said, when Maine’s business community refused to be taxed on federal forgivable loans that are exempt from federal taxes, she said.
“We heard the outcry from businesses, we heard from the Maine (state) Chamber of Commerce that they needed that double taxation advantage for the business community that has been hit so hard and has so much responsibility for this pandemic,” Breen said.
The PPP exemption would cost the state about $ 100 million in tax revenue, and the unemployment benefit exemption would cost the state about $ 50 million in revenue. Democrats and Republicans both said their proposals are contingent on additional revenue given to the state from higher alcohol sales.
The supplementary budget would also allocate $ 10 million – along with $ 20 million in federal funding – to support caregivers for people with intellectual disabilities, autism, developmental disorders, mental health and substance use disorders, Breen said.
“This is a great plan,” said Breen. “What we didn’t do is spend an additional $ 32 million in government funds on arcane tax changes in federal law that are unrelated to the pandemic and actually go back to tax years 2019 and 2018 that have more to do with Trump’s tax cuts have been from earlier than anything pandemic related. “
Breen said supplemental budgets are usually passed to balance the state budget, a constitutional requirement, but projections of state revenue for the remainder of the current fiscal year ending June 30 suggest the budget is in the black becomes.
Dana Connors, president of the Maine Chamber of Commerce, said business executives appreciated the decision to make PPP completely tax-free under federal tax law.
“That was a high priority for us and it was extremely welcome that Democrats and Republicans could get together,” said Connors. He added that the additional budget also includes other components that could be an issue for some Maine businesses.
Connors said he was optimistic that lawmakers would continue to broker a deal that would ensure full federal compliance with PPP. He said he also believed there might still be time to compromise on some other Republican issues.
Without a compromise, an additional budget crisis would set tough lines for the state’s next two-year budget, which has to be in place by the end of June and which also requires two-thirds of support. Mills has proposed a basically flat-rate spending package of $ 8.4 billion, which is also the subject of ongoing public hearings before lawmakers.
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