A group of Democratic lawmakers have put forward a plan to restructure Maine’s income tax brackets, a proposal that will result in higher taxes on the state’s individuals who earn more than $144,500 per year.

LD 229 — An Act to Bring Fairness in Income Taxes to Maine Families by Adjusting the Tax Brackets and Tax Rates — was sponsored by Rep. Ann Higgins Matlack (D-St. George). The progressive tax scheme is also cosponsored by Rep. Anne P. Graham (D-North Yarmouth), Rep. Lori K. Gramlich (D-Old Orchard Beach), Rep. Julia A.G. McCabe (D-Lewiston), Rep. Amy J. Roeder (D-Bangor), and Rep. Melanie F. Sachs (D-Freeport).

If approved, this proposal would see the state’s highest earners be taxed by up to 1.05 percent more than they currently are, bringing Maine’s maximum tax rate to 8.2 percent.

To accomplish this, three new tax brackets would be added to encompass individuals earning over $144,500, heads of household earning more than $216,750, and married couples making over $289,000.

The proposed law would also nearly double the upper threshold for the state’s lowest income tax bracket, allowing a broader swath of Mainers to qualify for it.

Currently, to be eligible for the 5.8 percent income tax rate, individuals must make less than $21,050, while heads of household must make under $31,550, and married couples must earn below $42,100.

With the proposed changes, these ceilings would be raised to $41,600, $62,400, and $83,200 respectively.

Maine’s income tax structure is currently comprised of three tax brackets with rates of 5.8 percent, 6.75 percent, and 7.15 percent.

The top rate of 7.15 percent applies to any individuals earning $50,000 or more, heads of household making over $75,000, and married couples bringing in more than $100,000.

Should the changes proposed by these Democratic lawmakers be approved, those making close to this threshold would see their tax rate decrease to 6.75 percent, while those making substantially higher amounts would either see their taxes increase or remain unchanged.

The proposed restructuring would add brackets with rates of 7.52 percent, 7.15 percent, and 8.2 percent, in that order.

Under Maine’s income tax system, the tax rate for a given bracket is only applied only to the income earned over the upper-threshold of the previous bracket.

For example, an individual earning $49,000 would be taxed at a rate of 5.8 percent on the first $21,050 of their income and at a rate of 6.75 percent on the remaining $27,950.

This structure helps to explain why the new tax brackets proposed in LD 229 seemingly appear out of order, as the new 7.52 percent bracket is sandwiched in between two brackets taxed at 7.15 percent.

While this higher rate may seem like a targeted tax increase on those earning a particular amount of income, it is likely included in order to somewhat counterbalance any savings these taxpayers would otherwise have seen on the initial portions of their income that fall under the state’s lower tax brackets.

This would effectively result in the entirety of top earners’ income being taxed at higher rates than lower earners’ income, not just the portions of their annual income that are above a given threshold.

Click Here to Read the Full Text of LD 229

This same tactic was utilized by the lawmakers in the 131st Legislature who introduced a similar bill which would have raised the state’s top tax rate to 8.45 percent.

Also mirrored in this legislation is the proposal to substantially raise the upper limit on the state’s lowest tax bracket.

This bill was ultimately vetoed by Gov. Janet Mills (D) on the grounds that it would not “deliver meaningful tax relief” to low-income Mainers.

She also argued that it would disrupt the stability of the state’s tax revenue due to the volatility of the highest-earners’ income sources.

“Maine’s highest income tax rate of 7.15 percent is the 10th highest state income tax rate in the country,” Mills said, “and there are concerns that increasing that top rate even further would create challenges for state budgeting, because it would increase the State’s reliance on a small number of taxpayers (less than 1 percent) whose income is disproportionately composed of highly volatile sources such as capital gains and business income.”

However, the Mills administration recently disclosed that, based on current revenue projections, Maine is facing a $450 million structural gap for the FY 26-27 biennium and a $118 million deficit in MaineCare spending for 2025.

In order to fill those holes, Mills has flip-flopped on her “No Tax Increases” campaign promise by proposing a massive increase in the tobacco excise tax, as well as smaller increases in taxes on hospitals, ambulances, and streaming entertainment services.

According to House Republicans who spoke last week with the Maine Wire, staffers from the Mills Administration have already signaled in closed-door meetings that the governor is prepared to sign another majority budget that relies on exclusively Democratic votes if GOP lawmakers refuse to support tax hikes.

LD 229 has been referred to the 132nd Legislature’s Taxation Committee where it will receive a public hearing in the coming months and be considered further by lawmakers.