To the Editor:
In December, the federal government extended provisions to Section 179 in the federal tax code allowing businesses to write off capital investments, software and equipment directly, rather than depreciating them over time.
Maine expands on this federal “bonus depreciation” with the Maine Capital Investment Credit, which benefits both in-state and out-of-state businesses.
So, in the legislature recently, both the Taxation and Appropriations committees have been working on ways to update our own tax laws to allow Maine businesses equivalent state income tax reductions.
The governor proposes that the state conform fully to the new federal tax code and also continue the Capital Investment Credit for at least the next four years.
The price tag for this would be $38 million for the next two years and presumably the same amount in the years beyond.
To pay for this, the governor has offered a series of one-time funds including $3 million from a fund dedicated to support efficiency in towns and schools and $1.4 million from casino revenue currently dedicated by the voters for education.
While a few legislators (such as myself) still have some trouble understanding the economic mechanism of “retroactive incentives,” certainly a majority of us support these tax benefits for businesses. We understand that businesses depend on predictability and that long-term business investment is good for the state.
However, along with my colleagues, I also want to understand the larger implications of these tax breaks at a time when the governor is proposing to shift $23 million in school funding from the state to local property taxpayers. I also want to understand how the state budget can structurally support tax expenditures of this magnitude going forward.
Any comprehensive discussion about the state budget requires participation from the executive branch. But, so far, the governor seems intent on keeping to himself information on current budget revenues and expenditures. Unlike previous governors, he is unwilling to offer a supplementary budget adjusted to reflect his current proposals.
Apparently, the governor intends to propose budgetary changes only in the service of his own policy priority for tax reduction in order to reduce the legislature’s leverage over other comprehensive public priorities such as education, energy and infrastructure.
My hope and intention is to move forward as directly as possible with immediate legislation to allow Maine taxpayers to file this year’s tax returns that conform to the new federal allowances. Then, directly, I hope we have a comprehensive discussion about how to allow business tax breaks going forward in conformity with federal law in relation to this year’s supplementary budget process. It seems only responsible.
As always, I ask folks to please share their thoughts and concerns.
Rep. Brian Hubbell
House District 135
Bar Harbor, Lamoine, Mount Desert