State releases analysis of Bush plan Study finds 69% of Maine households would receive cut in federal taxes

AUGUSTA – The wealthiest Maine families would receive average tax cuts of $3,495 under President Bush’s proposed tax plan, according to a state analysis.

Families with annual incomes of $99,833 and more would save an average of $3,117 in federal taxes and $378 in state taxes, according to the Maine Revenue Services. Ten percent of families in Maine fall into that category.

The next 10 percent, families with incomes of $74,819 to $99,832, would receive an average cut of $1,203 in federal taxes and $175 in state taxes.

Most families in Maine would have reductions of hundreds of dollars rather than thousands of dollars, if they are eligible at all, according to an analysis by Mike Allen, director of economic research at Maine Revenue Services.

The analysis says 69 percent of Maine households would get federal tax cuts, and 44 percent would experience reductions in state taxes. The percentage of families eligible for cuts increases with income.

About 29 percent of families with children have incomes that are too low to be eligible for tax cuts. Of the state’s 108,916 poorest families, 3,357 would be eligible for a benefit.

“It just seems topsy-turvy,” said Christopher “Kit” St. John, director of Maine Center of Economic Policy.

The proposal to eliminate taxes on corporate dividends is the most troubling, St. John said. The measure would not benefit the poorest taxpayers and would do little for the middle class, whose investments are largely locked into retirement accounts, St. John said.

Families making $59,961 to $74,818 would have an average federal tax reduction of $754 and an average state tax reduction of $136.

Those making $48,283 to $59,960 would have an average federal reduction of $566 and an average state reduction of $118.

Families with incomes of $38,534 to $48,282 would have average cuts of $483 and $97. Those making $29,840 to $38,533 would get average reductions of $406 and $75.

Families in the $23,191 to $29,839 category would save an average of $371 and $60. Those making $12,877 to $23,190 would get an average break of $169 and $46.

The Bush proposal would remove about $37.9 million from state revenues as the state faces a revenue shortfall of more than $1 billion over the next two years. That figure includes the $20 million estimated impact of a proposed increase for small-business expensing of new investment.

The analysis assumes that the Legislature would change the state tax code to make it conform to the federal code, Allen said.