2.__Rate reduction factor.__The rate reduction factor is 1% of the tax rate provided by section 5111 for tax years beginning on or after January 1, 2005, without taking into consideration the adjustments required by this section except for subsection 1, paragraph A.

3.__Indexing suspension factor.__For tax years beginning after December 31, 2005 and before January 1, 2010, the State Tax Assessor shall determine the indexing suspension factor. The indexing suspension factor for each of these years is one minus an amount equal to the sum of the following amounts, divided by the total projected individual income tax liability for tax years beginning in the next calendar year:

A. The estimated increase in individual income tax liability for tax years beginning in the next calendar year arising from the suspension of indexing pursuant to section 5403, as estimated by the assessor, reduced by:

(1) The amount of estimated revenue foregone for tax years beginning in the next calendar year as a result of the increase from $2,000 to $4,750 of the credit contained in section 5219-N, subsection 1, as estimated by the assessor; and

(2) The amount of estimated revenue foregone for tax years beginning in the next calendar year as a result of the decrease in the tax rate from 8.5% to 8.45% as provided in section 5111-C, subsection 1, paragraph A as applied in subsequent years, as estimated by the assessor.

The factor must be rounded up to the nearest 1/100 of a percentage point.__The determination required by this subsection must be made on or about September 15th of the year preceding its application.

Sec. A-9. 36 MRSA §5203-C, sub-§5 is enacted to read:

5.__Rates reduced.__Beginning in 2005, and each subsequent calendar year thereafter through 2017, on or about September 15th, the State Tax Assessor shall, in accordance with this subsection and for taxable years beginning during the calendar year, adjust the tax rates contained in subsection 1, paragraph H, subparagraphs (1) and (2).__Each tax rate contained in subsection 1, paragraph H, subparagraphs (1) and (2) as previously adjusted must be reduced in the same proportion to