The National Federation of Independent Business (NFIB) urged lawmakers on April 7 not to include a proposed 2% surtax on millionaires in Maine’s supplemental budget, which would raise the state’s top income tax rate to 9.15%. The proposal was added by the Appropriations Committee in a late-night vote and is expected to move forward along partisan lines.
If approved, the new rate would make Maine’s top income tax the highest in New England and third highest in the Northeast, behind only New York and New Jersey. NFIB State Director David Clough said this could have significant consequences for small business owners. “This significant tax hike unfairly places an extra ‘sweat equity penalty’ on small business owners who retire after having sacrificed for years to create jobs and build up the value of their business,” Clough said.
Clough also noted that many small business owners do not have traditional retirement plans because they reinvest earnings into their businesses, relying instead on selling their companies as a source of retirement income. He said that raising taxes now could make it harder for these owners when they retire: “Small business owners across Maine do not take high wages, rather investing their cash flow back into the business, so they do not get higher payments from Social Security when they retire.”
According to Clough, some members are already considering moving their businesses out of state due to concerns about increased taxes and what he described as an unfavorable climate for small enterprises. He cited one member who wrote: “We are a third-generation business and are disgusted with the business climate here!”
NFIB held a press conference at the capitol highlighting these issues and urging lawmakers to focus instead on strengthening Maine’s economy. “Raising our top income tax rate to the highest in New England and joining the likes of New York and New Jersey diverts attention from making the Maine economy stronger and helping small businesses survive stiff competition and be successful,” Clough said.
