AUGUSTA, Maine — On Monday, the Maine Legislature began hearing public testimony Governor Mills proposed supplemental budget. Hearings are slated to run through Thursday of this week and will be held virtually.
The focus of the hearing on Monday surrounded the taxation of certain federal funds awarded to businesses in Maine. As part of the new supplemental budget, federal Paycheck Protection Loans would be subject to taxes in an effort to offset the budget.
Mills administration officials said during the hearing Monday it fears a possible $100 million budget shortfall for the state if it does tax those funds.
"...we would have preferred to match the double tax benefit that the Federal government has the capacity to provide. But Maine has to balance its budget, and when the Federal government provided this double benefit, they unfortunately also rejected the very aid package to State and local governments that could have allowed us to match it on our end," said the Department of Administrative and Financial Services Commissioner Kirsten Figueroa in a statement.
According to the proposed budget, businesses would be able to deduct qualified expenses like rent, payroll, or utilities. However, they will have to pay taxes on any other expenses.
Figueroa says the state wanted to conform to the changes in the federal tax code passed by Congress in late 2020, however fears losing the $100 million in state tax revenue.
“Let’s be clear on what the Administration is proposing for the Paycheck Protection Program (PPP): we are maintaining the normal tax treatment of these funds, which will ensure no Maine business will owe State taxes on PPP proceeds – while achieving a balanced budget," said Figueroa.
Republicans were quick to speak out against the plan, many calling it unfair to businesses who believed they would be exempt from all taxes on this federal aid.
"These small businesses are barely hanging on as it is. Taking away the savings that they have set aside to get through this winter and spring would be devastating. This is money they intended to use to pay their heating bills, pay their employees, and survive—all of the things the program was designed for," said Senate Republican Leader Jeff Timberlake, R-Androscoggin.
Maine House Republican Leader Kathleen Dillingham, R-Oxford adding "at a time of unprecedented economic hardship for Maine businesses, they should be a priority for the administration who needs to make the tough budgetary decisions necessary to ensure they receive this benefit as Congress intended.”
Hearings on the proposed budget continue Tuesday at 10:00 a.m. You can stream the hearings live on YouTube.
State House is currently closed to the public due to COVID-19.
All public hearings, work sessions, and other committee meetings will be held virtually. Those who wish to testify as part of the hearing can email the committee clerk at afa@legislature.maine.gov at least 30 minutes before the start of the public hearing. Written testimony can be submitted online at www.mainelegislature.org/testimony.