Tax Credits for Working Families

Maine

Earned Income Tax Credit^

Income Tax Rate: 0% up to $5000, 6.5% from $5,000 to $19,950, and 7.95% for income over $19,950

State EITC: Yes

Refundable: No

Enacted: 2000

Formula: 5 percent of federal EITC, except in tax year 2009 and tax year 2010. For those years, the Maine credit is 4 percent of the federal EITC.1

Notes/News: In 2009, the Maine legislature passed a tax reform package that made the state’s EITC partially refundable. In June 2010, that package was vetoed by voters and the expansion of the EITC did not take effect.

On April 2, 2013, the Maine House passed a bill, HP 305, that would increase the state EITC from 5 percent to 50 percent of the federal EITC, and make the credit refundable. The bill was amended in the Senate to only increase the EITC to 10 percent of the federal credit, and passed by both the Senate and the House, but has now been placed on the special appropriations table and will likely not move forward during this legislative session.

Reports/Materials: A simple 1-2 punch to give working Mainers a raise, Joel Johnson, Maine Center for Economic Policy, September 2014

Maine State & Local Taxes, from Who Pays? A Distributional Analysis of the Tax Systems in All 50 States, Institute on Taxation and Economic Policy, January 2013

Maine: State and Local Taxes in 2007, Institute on Taxation and Economic Policy, November 2009

Articles: Tax reform package deserves the support of Maine businesses, Kurt Wise, The Exception Magazine, July 6, 2009

State Credit: No

Child Tax Credit^

State Credit: No

Child and Dependent Care Tax Credit^

State Credit: Yes

Refundable: Yes, up to $500

Eligibility: Same as the federal credit

Formula: 25 percent of the federal child and dependent care credit. If the expenses are used toward a care center with a state-issued “Quality Certificate,” the credit can be worth up to 50 percent of the federal credit.

Property Tax Circuit Breaker^

Circuit Breaker: Yes, also known as the Maine Property Tax Fairness Credit, created in the Maine budget bill for 2013

Refundable: Yes

Eligibility: Maine residents, both homeowners and renters, are eligible if they had Maine adjusted gross income of not more than $40,000 and paid property tax on a home in Maine during the tax year that was more than 10% of Maine adjusted gross income or paid rent to live in a home or apartment in Maine during the tax year that was more than 40% of Maine adjusted gross income.

Formula: Maine residents with Maine adjusted gross income up to $40,000 who pay more than 10% of their Maine adjusted gross income in property tax (for renters, calculated as 25%of their rent) are allowed a credit against their income tax that is  40% of the portion of their property taxes that is more than 10% of their total Maine adjusted gross income, up to a maximum of  $300, or $400 for those 70 or older.

News/Notes: In 2013, the budget, (enacted when the legislature overrode the Governor’s veto) created a new  ”Property Tax Fairness Credit” to replace the state’s Property Tax Circuit Breaker Program. The new credit is refundable and is implemented through the state’s income tax  rather than as a separate rebate, and will reach more people, but the maximum value of the new credit is significantly less than the old Property Tax Circuit Breaker. In addition, low- and middle-income Maine residents won’t get any circuit breaker refunds or property tax fairness credits for taxes and rent paid in in tax year 2012.

In April, 2014, the legislature passed, and the governor signed into law, a bill (LD1751) to double the Property Tax Fairness Credit.

Reports/Materials: 5 Ways to Solve Maine’s Budget Crisis and Prevent Property Tax Increases, Garrett Martin, Maine Center for Economic Policy, May 2013

Governor’s Modest Tax Hike on the Wealthy Won’t Erase His Massive Tax Hikes on Low- and Middle-Income Mainers, Joel Johnson, Maine Center for Economic Policy, May 2013

2013 Supplemental Budget Briefing, 2014-2015 Biennial Budget Briefing, Office of Governor Paul LePage, January 2013

The Consequences of Maine’s Income Tax Cuts, Maine Center for Economic Policy, October 2012

Testimony at Hearing on LD 1680 and LD 1693: Circuit Breaker Property Tax Relief, Maine Center for Economic Policy, January 2012

Further Reflections Income Inequality in Maine, Maine Center for Economic Policy, November 2011

 

1 36 MRS 8.822 §5219-S