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An Act To Reduce the Income Tax Burden on Maine Residents
Be it enacted by the People of the State of Maine as follows:
PART A
Sec. A-1. 36 MRSA §5111, sub-§1-B,  as enacted by PL 1999, c. 731, Pt. T, §3, is amended to read:
 
1-B. Single individuals and married persons filing separate returns; tax years beginning 2002 but before 2007.   For tax years beginning on or after January 1, 2002 but before January 1, 2007, for single individuals and married persons filing separate returns:
Sec. A-2. 36 MRSA §5111, sub-§1-C  is enacted to read:
 
1-C.  Single individuals and married persons filing separate returns; tax years beginning 2007.     For tax years beginning on or after January 1, 2007, for single individuals and married persons filing separate returns:
Sec. A-3. 36 MRSA §5111, sub-§2-B,  as enacted by PL 1999, c. 731, Pt. T, §5, is amended to read:
 
2-B. Heads of households; tax years beginning 2002 but before 2007.   For tax years beginning on or after January 1, 2002 but before January 1, 2007, for unmarried individuals or legally separated individuals who qualify as heads of households:
Sec. A-4. 36 MRSA §5111, sub-§2-C  is enacted to read:
 
2-C.  Heads of households; tax years beginning 2007.     For tax years beginning on or after January 1, 2007, for unmarried individuals or legally separated individuals who qualify as heads of households:
Sec. A-5. 36 MRSA §5111, sub-§3-B,  as enacted by PL 1999, c. 731, Pt. T, §7, is amended to read:
 
3-B. Individuals filing married joint return or surviving spouses; tax years beginning 2002 but before 2007.   For tax years beginning on or after January 1, 2002 but before January 1, 2007, for individuals filing married joint returns or surviving spouses permitted to file a joint return:
Sec. A-6. 36 MRSA §5111, sub-§3-C  is enacted to read:
 
3-C.  Individuals filing married joint return or surviving spouses; tax years beginning 2007.     For tax years beginning on or after January 1, 2007, for individuals filing married joint returns or surviving spouses permitted to file a joint return:
Sec. A-7. Application. This Part applies to tax years beginning on or after January 1, 2007.
PART B
Sec. B-1. 36 MRSA §5219-N, sub-§1,  as amended by PL 2003, c. 390, §48, is further amended to read:
 
1. Generally.   Except as provided in subsection 2, an individual whose Maine taxable income determined as if the individual were a resident individual for the entire year is $2,000$4,000 or less for single individuals, married individuals filing separately or heads of households and $8,000 or less for married individuals and surviving spouses filing joint returns is allowed a credit equal to the tax otherwise imposed on that individual by this Part. In no case may thisThis credit may not reduce the Maine income tax to less than zero.
Sec. B-2. Application. This Part applies to tax years beginning on or after January 1, 2007.
PART C
Sec. C-1. 36 MRSA §1811, first ¶,  as amended by PL 2001, c. 439, Pt. TTTT, §2 and affected by §3, is further amended to read:
A tax is imposed on the value of all tangible personal property and taxable services sold at retail in this State. The rate of tax is 7% on the value of liquor sold in licensed establishments as defined in Title 28-A, section 2, subsection 15, in accordance with Title 28-A, chapter 43; 7%10% on the value of rental of living quarters in any hotel, rooming house or tourist or trailer camp; 10% on the value of rental for a period of less than one year of an automobile; 7%9% on the value of prepared food; and 5% on the value of all other tangible personal property and taxable services. Value is measured by the sale price, except as otherwise provided.
Sec. C-2. Effective date. This Part takes effect October 1, 2007.
 
SUMMARY
This bill reduces the income tax burden on Maine residents by:
1. Reducing the top individual income tax rate from 8.5% to 7.8%; and
2. Increasing the low-income tax credit from $2,000 to $4,000 for individuals, married individuals filing separately and heads of households and to $8,000 for married persons and surviving spouses filing joint returns.
This bill offsets the loss of income tax revenue by increasing the rate of the sales tax imposed on prepared food from 7% to 9% and on short-term lodging from 7% to 10%.