CONCEPT DRAFT

SUMMARY

This bill is a concept draft pursuant to Joint Rule 208.

The bill would restructure the State's tax system to provide a balanced system that produces a more reliable revenue stream that is fairer to taxpayers, less volatile to changes in the economy and more attractive to economic development. The bill would contain the following provisions.

Effective for tax years beginning on or after January 1, 2002, the bill would revise the personal income tax by reducing the 4 current brackets to 2 brackets of 4% and 7% and establish a flat 7% rate for the corporate income tax. The bill would make the earned income tax credit refundable.

The bill would reduce the general sales tax rate from 5% to 4.5% effective July 1, 2002.

The bill would exempt from sales tax the first $5,000 paid for an automobile and would repeal the trade-in credit for automobiles effective July 1, 2002.

The bill would apply a 3% sales tax to motor fuels effective July 1, 2002 and would allocate an additional .05% of total gas tax revenues for marine uses and an additional .13% of gas tax revenues for the Snowmobile Trail Fund.

The bill would amend the business equipment tax reimbursement, BETR, program for property placed in service after April 1, 2002 by prohibiting receipt of benefits under both the BETR program and municipal tax increment financing, would restrict reimbursement to manufacturing and research equipment, would eliminate eligibility for retail and services industries, would reduce reimbursement to 60% of taxes paid, and would impose a wage standard that must be met for 95% of the BETR participants' employees in Maine. The wage standard would require that the hourly wage plus hourly apportioned benefits for each employee exceed the average weekly wage for that employee's county of residence divided by 40.

The bill would repeal the property tax exemption for pollution control facilities effective March 31, 2002. The exemption would be replaced by reimbursement under the BETR program.