Distributional Analysis:
“Better Deal” Provides Bigger Tax Cuts for Most Mainers while Increasing
Investment in Education and Other Critical Services
The Maine Center for Economic Policy worked with the Institute on Taxation and Economic Policy to develop a
comprehensive distributional analysis comparing competing tax reform plans from Governor LePage and
legislative Democrats.i The analysis shows that the Democrats’ “Better Deal for Maine” tax reform plan would
provide more tax cuts to most low- and middle-income Mainers.
The Better Deal for Maine plan would cut taxes, on average, for the bottom 95% of Maine taxpayers. It would
reduce taxes more than the governor’s plan, on average, for the bottom 80% of Maine families.
Another major difference between the Better Deal for Maine plan and the governor’s plan is the impact on highincome taxpayers. Over half the benefits of Governor LePage’s plan accrue to the highest-income Mainers and
come at the expense of funding for education, healthcare, and other critical services important to Maine people
and businesses. ii Under the Better Deal plan the average tax cut for Mainers in the 80th–95th percentiles, those
with annual incomes from $89,000 to $167,000, will be smaller than in the governor’s plan, and the top 5% of the
income distribution, those with annual incomes greater than $167,000, will see a modest tax increase. These
changes improve the fairness of Maine’s tax system and increase the state’s capacity to invest in schools and
communities compared to the governor’s plan.

Estimated Distributional Impact of Two Maine Tax Reform Proposals
Compares Current Law to Proposed Fully Phased-In Law Using 2014 Incomes
All Maine Residents, 2014 Incomes
2014 Income

Lowest
20%

Second
20%

Middle
20%

Fourth
20%

Next
15%

Next 4%

Top 1%

Income Range

< $22K

$22K –
$36K

$36K –
$57K

$57K –
$89K

$89K –
$167K

$167K –
$371K

>
$371K

Average Income in Group

$14K

$29K

$47K

$72K

$116K

$228K

$838K

Governor LePage Tax Reform Plan
Tax Change as % of Income

-1.6%

0.0%

-0.0%

-0.1%

-0.4%

-0.6%

-0.9%

Average Tax Change ($)

-218

+4

-24

-93

-510

-1,275

-7,546

"Better Deal for Maine" Tax Reform Plan
Tax Change as % of Income

-2.6%

-0.7%

-0.4%

-0.2%

-0.1%

0.5%

0.4%

Average Tax Change ($)

–365

–195

–191

–169

–156

+1,065

+3,582

Data Source: Institute on Taxation and Economic Policy (ITEP)
Data Notes: Estimates produced by ITEP consider the comprehensive impact of proposed changes in Governor LePage’s
tax reform plan and the Better Deal for Maine tax reform plan to personal income taxes, sales and use taxes, and
homestead property tax exemption. Better Deal plan analysis does not include impact of equalizing tobacco taxes. Due to
differences in methodology and data, ITEP’s analysis of the distributional impacts of Governor LePage’s tax reform
proposal differs from that of Maine Revenue Services. No MRS analysis of the Better Deal plan is currently available. For
detailed information about ITEP’s microsimulation model see: http://www.itep.org/about/itep_tax_model_simple.php

Maine Center for Economic Policy

www.mecep.org

April 2015

 Overall, the Better Deal plan would make Maine’s state and local tax system more progressive. In contrast to the
governor’s plan, it does not increase sales tax rates above current levels. It replaces the current individual income
tax with a more progressive rate and bracket structure that retains the top marginal rate of 7.95% for individuals
with income greater than $150,000 and families with income greater than $300,000. It provides more targeted
property tax relief to Maine residents by doubling the homestead property tax exemption for all Mainers and
increasing the size of the property tax fairness credit by the same amount the governor’s plan proposes. It would
also adopt the governor’s plan for a refundable sales tax fairness credit to offset the impact of permanently higher
sales tax rates and expansion of the sales tax to more goods and services.
The bottom line is that the Better Deal plan reduces taxes more than the governor’s plan for the vast majority of
Maine families. And it does so without forcing future cuts to education, healthcare, and other critical services
important to all Maine people and businesses.

i

The Institute on Taxation and Economic Policy (ITEP) regularly assesses the fairness of state and local tax systems. Due to
differences in methodology and data, ITEP’s analysis of the distributional impacts of Governor LePage’s tax reform proposal
differs from that of Maine Revenue Services (the MRS analysis is located here:
http://www.maine.gov/revenue/research/distributional_analysis_tax%20reform_2015.pdf). Detailed information about ITEP’s
microsimulation model is available here: http://www.itep.org/about/itep_tax_model_simple.php
ii

According to analysis from Maine Revenue Services, more than half of the approximately $292 million net annual tax cut in
2019 proposed by the Governor would accrue to the top 10% of Maine income earners—households earning more than $134
thousand per year. See table 7, column 10 of this document:
http://www.maine.gov/revenue/research/distributional_analysis_tax%20reform_2015.pdf

Maine Center for Economic Policy

www.mecep.org

April 2015