Maine Democrats have proposed levying an additional four percent tax on income earned over $1 million to fund public education.

Sponsored by Rep. Cheryl A. Golek (D-Harpswell), LD 1089 would impose this new “surcharge” on income beginning with that generated this year.

The four percent tax would only be applied to the portion of a Mainer’s income that is above the $1 million threshold, meaning that everything up to that point would not be subject to this additional fee.

As the law is currently written, revenue collected from this tax could only be used to fund public pre-kindergarten through grade 12 education.

Cosponsoring this bill are Sen. Mike Tipping (D-Penobscot), Rep. William R. Bridgeo (D-Augusta), Speaker of the House Ryan D. Fecteau (D-Biddeford), Rep. Gary Friedmann (D-Bar Harbor), Rep. Drew Gattine (D-Westbrook), Rep. Laurie Osher (D-Orono), Rep. Ambureen Rana (D-Bangor), Rep. Suzanne M. Salisbury (D-Westbrook), and Sen. Jill Duson (D-Cumberland).

A public hearing for this bill will be held on Wednesday, March 26 at 10am in State House Room 127. Testimony may be submitted online at www.mainelegislature.org/testimony.

Click Here for More Information on LD 1089

Along these same lines, LD 1047 — sponsored by Rep. Grayson B. Lookner (D-Portland) — looks to impose an additional four percent tax on capital gains earned by residents over a certain threshold.

Capital gains refers to the increase in the value of an asset between the time it is acquired and when it is sold. These assets include a wide range of investments, including stocks, bonds, or real estate, as well as items purchased for personal use, like furniture or a boat.

Federally, most filers are required to pay 15 percent of their long-term capital gains in taxes.

Currently, Maine taxes capital gains alongside all other forms of income. Under the current structure, this means that they are taxed at a rate of 7.25 percent at most.

This proposal, however, would impose an additional four percent tax on any capital gains earned over a particular threshold, bringing the maximum tax rate on this portion of Mainers’ income to 11.25 percent.

Another proposal that has been introduced this year seeks to restructure Maine’s income tax code so that those who are making over $144,500 annually are taxed at a higher rate.

If approved, this bill would see the Maine’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.

Working in the opposite direction, Maine Republicans have introduced bills that would eliminate the state’s income tax altogether. While one proposal would do away with the tax immediately, another would gradually phase it out over the course of the next few years.

The law that would eliminate the income tax right away, beginning with the 2026 tax year, would also require the development a zero-based budgets for fiscal years 2026-27 and 2028-29.

From that point on, all departments and agencies in the Executive, Legislative and Judicial Departments of State Government would be required to create a zero-based budget at least once every eight years.

In other words, all corners of the state government would regularly be required to reconsider all aspects of their spending and rebuild their budgets from the ground up.

The other proposal on the table, which would eliminate the state’s income tax gradually, would begin taking effect in 2026, gradually phasing it out over the next few years, with Mainers paying a smaller and smaller percentage of the state income tax until it is eliminated entirely in 2030.

If approved, this legislation would result in the elimination of state income tax both for individuals and corporations.

In conjunction with this, the Bureau of the Budget would be directed to reduce the state’s budget proportionally, so that overall expenditures and revenue are reduced in corresponding measure.

Public hearings have already been held for both of these bills. Members of the Taxation Committee will now be holding work sessions to discuss the proposed legislation further before making a recommendation to the full chamber.