An Act To Reduce Income Tax Rates
Sec. 1. 36 MRSA §5111, sub-§1-B, as enacted by PL 1999, c. 731, Pt. T, §3, is amended to read:
| If Maine Taxable income is: | The tax is: |
| Less than $4,200 | 2% of the Maine taxable income |
| At least $4,200 but less than $8,350 | $84 plus 4.5% of the excess over $4,200 |
| At least $8,350 but less than $16,700 | $271 plus 7% of the excess over $8,350 |
| $16,700 or more | $856 plus 8.5% of the excess over $16,700 |
Sec. 2. 36 MRSA §5111, sub-§1-C is enacted to read:
| If Maine Taxable income is: | The tax is: |
| $4,850 or less | 1% of the Maine taxable income |
| More than $4,850 but less than $9,700 | $49 plus 3.5% of the excess over $4,850 |
| At least $9,700 but less than $19,450 | $218 plus 6% of the excess over $9,700 |
| $19,450 or more | $803 plus 7.5% of the excess over $19,450 |
Sec. 3. 36 MRSA §5111, sub-§1-D is enacted to read:
| If Maine Taxable income is: | The tax is: |
| $4,850 or less | $0 |
| More than $4,850 but less than $9,700 | 2% of the excess over $4,850 |
| At least $9,700 but less than $19,450 | $97 plus 4.5% of the excess over $9,700 |
| $19,450 or more | $536 plus 6% of the excess over $19,450 |
Sec. 4. 36 MRSA §5111, sub-§1-E is enacted to read:
| If Maine Taxable income is: | The tax is: |
| $4,850 or less | $0 |
| More than $4,850 but less than $9,700 | 0.5% of the excess over $4,850 |
| At least $9,700 but less than $19,450 | $24 plus 3% of the excess over $9,700 |
| $19,450 or more | $317 plus 4.5% of the excess over $19,450 |
Sec. 5. 36 MRSA §5111, sub-§2-B, as enacted by PL 1999, c. 731, Pt. T, §5, is amended to read:
| If Maine Taxable income is: | The tax is: |
| Less than $6,300 | 2% of the Maine taxable income |
| At least $6,300 but less than $12,500 | $126 plus 4.5% of the excess over $6,300 |
| At least $12,500 but less than $25,050 | $405 plus 7% of the excess over $12,500 |
| $25,050 or more | $1,284 plus 8.5% of the excess over $25,050 |
Sec. 6. 36 MRSA §5111, sub-§2-C is enacted to read:
| If Maine Taxable income is: | The tax is: |
| $7,300 or less | 1% of the Maine taxable income |
| More than $7,300 but less than $14,550 | $73 plus 3.5% of the excess over $7,300 |
| At least $14,550 but less than $29,200 | $327 plus 6% of the excess over $14,550 |
| $29,200 or more | $1,206 plus 7.5% of the excess over $29,200 |
Sec. 7. 36 MRSA §5111, sub-§2-D is enacted to read:
| If Maine Taxable income is: | The tax is: |
| $7,300 or less | $0 |
| More than $7,300 but less than $14,550 | 2% of the excess over $7,300 |
| At least $14,550 but less than $29,200 | $145 plus 4.5% of the excess over $14,550 |
| $29,200 or more | $804 plus 6% of the excess over $29,200 |
Sec. 8. 36 MRSA §5111, sub-§2-E is enacted to read:
| If Maine Taxable income is: | The tax is: |
| $7,300 or less | $0 |
| More than $7,300 but less than $14,550 | 0.5% of the excess over $7,300 |
| At least $14,550 but less than $29,200 | $36 plus 3% of the excess over $14,550 |
| $29,200 or more | $476 plus 4.5% of the excess over $29,200 |
Sec. 9. 36 MRSA §5111, sub-§3-B, as enacted by PL 1999, c. 731, Pt. T, §7, is amended to read:
| If Maine Taxable income is: | The tax is: |
| Less than $8,400 | 2% of the Maine taxable income |
| At least $8,400 but less than $16,700 | $168 plus 4.5% of the excess over $8,400 |
| At least $16,700 but less than $33,400 | $542 plus 7% of the excess over $16,700 |
| $33,400 or more | $1,711 plus 8.5% of the excess over $33,400 |
Sec. 10. 36 MRSA §5111, sub-§3-C is enacted to read:
| If Maine Taxable income is: | The tax is: |
| $9,750 or less | 1% of the Maine taxable income |
| More than $9,750 but less than $19,450 | $98 plus 3.5% of the excess over $9,750 |
| At least $19,450 but less than $38,900 | $437 plus 6% of the excess over $19,450 |
| $38,900 or more | $1,604 plus 7.5% of the excess over $38,900 |
Sec. 11. 36 MRSA §5111, sub-§3-D is enacted to read:
| If Maine Taxable income is: | The tax is: |
| $9,750 or less | $0 |
| More than $9,750 but less than $19,450 | 2% of the excess over $9,750 |
| At least $19,450 but less than $38,900 | $194 plus 4.5% of the excess over $19,450 |
| $38,900 or more | $1,069 plus 6% of the excess over $38,900 |
Sec. 12. 36 MRSA §5111, sub-§3-E is enacted to read:
| If Maine Taxable income is: | The tax is: |
| $9,750 or less | $0 |
| More than $9,750 but less than $19,450 | 0.5% of the excess over $9,750 |
| At least $19,450 but less than $38,900 | $48 plus 3% of the excess over $19,450 |
| $38,900 or more | $632 plus 4.5% of the excess over $38,900 |
Sec. 13. 36 MRSA §5200, sub-§1, as amended by PL 2005, c. 618, §6 and affected by §22, is further amended to read:
| If the income is: | The tax is: |
| Not over $25,000 | 3.5% of the income |
| $25,000 but not over $75,000 | $875 plus 7.93% of the excess over $25,000 |
| $75,000 but not over $250,000 | $4,840 plus 8.33% of the excess over $75,000 |
| $250,000 or more | $19,418 plus 8.93% of the excess over $250,000 |
In the case of an affiliated group of corporations engaged in a unitary business with activity taxable only by Maine, the rates provided in this subsection are applied only to the first $250,000 of the Maine net income of the entire group and must be apportioned equally among the taxable corporations unless those taxable corporations jointly elect a different apportionment. The balance of the Maine net income of the entire group is taxed at 8.93%.
In the case of an affiliated group of corporations engaged in a unitary business with activity taxable both within and without this State, the rates provided in this subsection are applied only to the first $250,000 of the net income of the entire group and must be apportioned equally among the taxable corporations unless those taxable corporations jointly elect a different apportionment. The balance of the net income of the entire group is taxed at 8.93%.
Sec. 14. 36 MRSA §5200, sub-§1-A is enacted to read:
| If the income is: | The tax is: |
| Not over $25,000 | 2.5% of the income |
| $25,000 but not over $75,000 | $625 plus 6.93% of the excess over $25,000 |
| $75,000 but not over $250,000 | $4,090 plus 7.33% of the excess over $75,000 |
| $250,000 or more | $16,918 plus 7.93% of the excess over $250,000 |
In the case of an affiliated group of corporations engaged in a unitary business with activity taxable only by Maine, the rates provided in this subsection are applied only to the first $250,000 of the Maine net income of the entire group and must be apportioned equally among the taxable corporations unless those taxable corporations jointly elect a different apportionment. The balance of the Maine net income of the entire group is taxed at 7.93%.
In the case of an affiliated group of corporations engaged in a unitary business with activity taxable both within and without this State, the rates provided in this subsection are applied only to the first $250,000 of the net income of the entire group and must be apportioned equally among the taxable corporations unless those taxable corporations jointly elect a different apportionment. The balance of the net income of the entire group is taxed at 7.93%.
Sec. 15. 36 MRSA §5200, sub-§1-B is enacted to read:
| If the income is: | The tax is: |
| Not over $25,000 | 1% of the income |
| $25,000 but not over $75,000 | $250 plus 5.43% of the excess over $25,000 |
| $75,000 but not over $250,000 | $2,965 plus 5.83% of the excess over $75,000 |
| $250,000 or more | $13,168 plus 6.43% of the excess over $250,000 |
In the case of an affiliated group of corporations engaged in a unitary business with activity taxable only by Maine, the rates provided in this subsection are applied only to the first $250,000 of the Maine net income of the entire group and must be apportioned equally among the taxable corporations unless those taxable corporations jointly elect a different apportionment. The balance of the Maine net income of the entire group is taxed at 6.43%.
In the case of an affiliated group of corporations engaged in a unitary business with activity taxable both within and without this State, the rates provided in this subsection are applied only to the first $250,000 of the net income of the entire group and must be apportioned equally among the taxable corporations unless those taxable corporations jointly elect a different apportionment. The balance of the net income of the entire group is taxed at 6.43%.
Sec. 16. 36 MRSA §5200, sub-§1-C is enacted to read:
| If the income is: | The tax is: |
| Not over $25,000 | $0 |
| $25,000 but not over $75,000 | 3.93% of the excess over $25,000 |
| $75,000 but not over $250,000 | $1,965 plus 4.33% of the excess over $75,000 |
| $250,000 or more | $9,543 plus 4.93% of the excess over $250,000 |
In the case of an affiliated group of corporations engaged in a unitary business with activity taxable only by Maine, the rates provided in this subsection are applied only to the first $250,000 of the Maine net income of the entire group and must be apportioned equally among the taxable corporations unless those taxable corporations jointly elect a different apportionment. The balance of the Maine net income of the entire group is taxed at 4.93%.
In the case of an affiliated group of corporations engaged in a unitary business with activity taxable both within and without this State, the rates provided in this subsection are applied only to the first $250,000 of the net income of the entire group and must be apportioned equally among the taxable corporations unless those taxable corporations jointly elect a different apportionment. The balance of the net income of the entire group is taxed at 4.93%.
Sec. 17. 36 MRSA §5203-B, as amended by PL 2003, c. 673, Pt. JJ, §2 and affected by §6, is further amended to read:
§ 5203-B. Corporate income tax surcharge
In addition to the tax liability otherwise established by this Part, a tax surcharge of 10% of the total amount of state tax liability established by sections section 5200 and former section 5203-C is imposed on taxable corporations for tax years beginning in 1991 or 1992.
Sec. 18. 36 MRSA §5203-C, as amended by PL 2005, c. 618, §§7 and 8 and affected by §22, is repealed.
Sec. 19. 36 MRSA §5217-A, as amended by PL 2003, c. 673, Pt. JJ, §4 and affected by §6, is further amended to read:
§ 5217-A. Income tax paid to other taxing jurisdiction
A resident individual is allowed a credit against the tax otherwise due under this Part , excluding the tax imposed by section 5203-C, for the amount of income tax imposed on that individual for the taxable year by another state of the United States, a political subdivision of any such state, the District of Columbia or any political subdivision of a foreign country that is analogous to a state of the United States with respect to income subject to tax under this Part that is derived from sources in that taxing jurisdiction. In determining whether income is derived from sources in another jurisdiction, the assessor may not employ the law of the other jurisdiction but shall instead assume that a statute equivalent to section 5142 applies in that jurisdiction. The credit, for any of the specified taxing jurisdictions, may not exceed the proportion of the tax otherwise due under this Part , excluding the tax imposed by section 5203-C, that the amount of the taxpayer's Maine adjusted gross income derived from sources in that taxing jurisdiction bears to the taxpayer's entire Maine adjusted gross income; except that, when a credit is claimed for taxes paid to both a state and a political subdivision of a state, the total credit allowable for those taxes does not exceed the proportion of the tax otherwise due under this Part , excluding the tax imposed by section 5203-C, that the amount of the taxpayer's Maine adjusted gross income derived from sources in the other state bears to the taxpayer's entire Maine adjusted gross income.
Sec. 20. 36 MRSA §5219-H, as repealed and replaced by PL 2003, c. 673, Pt. F, §1 and affected by §2, is further amended to read:
§ 5219-H. Application of credits against taxes
Sec. 21. 36 MRSA §5219-N, sub-§2, ¶A, as enacted by PL 1997, c. 557, Pt. E, §1 and affected by §2 and Pt. G, §1, is amended to read:
Sec. 22. 36 MRSA §5219-N, sub-§2, ¶B, as amended by PL 2003, c. 673, Pt. JJ, §5 and affected by §6, is repealed.
Sec. 23. 36 MRSA §5403, as repealed and replaced by PL 1999, c. 731, Pt. T, §10 and affected by §11, is amended to read:
§ 5403. Annual adjustments for inflation
Beginning in 2002, and each subsequent calendar year thereafter, on or about September 15th, the State Tax Assessor shall multiply the cost-of-living adjustment for taxable years beginning in the succeeding calendar year by the dollar amounts of the tax rate tables specified in section 5111, subsections 1-B , 2-B and 3-B to 3-E. If the dollar amounts of each rate bracket, adjusted by application of the cost-of-living adjustment, are not multiples of $50, any increase must be rounded to the next lowest multiple of $50. If the cost-of-living adjustment for any taxable year is 1.000 or less, no adjustment may be made for that taxable year in the dollar bracket amounts of the tax rate tables. The assessor shall incorporate such changes into the income tax forms, instructions and withholding tables for the taxable year.
Sec. 24. Application. This Act applies to tax years beginning on or after January 1, 2009.
SUMMARY
This bill reduces over a 3-year period the income tax rates imposed on individuals and corporations. For tax years beginning in 2009, the tax rates are reduced by one percentage point; in tax year 2010, by another point and a half; and in 2011 by another point and a half. The effect of these reductions is that, beginning with tax years beginning on or after January 1, 2011, for individuals, income now taxed at the rate of 2% will not be taxed; income taxed at the rate of 4.5% will be taxed at the rate of 0.5%; income taxed at the rate of 7% will be taxed at the rate of 3%; and income taxed at the rate of 8.5% will be taxed at the rate of 4.5%.
For corporations, beginning with tax years beginning on or after January 1, 2011, income of $25,000 or less will not be taxed; income of $25,000 to $75,000 now taxed at the rate of 7.93% will be taxed at the rate of 3.93%; income of $75,000 to $250,000 now taxed at the rate of 8.33% will be taxed at the rate of 4.33%; and income of more than $250,000 now taxed at the rate of 8.93% will be taxed at the rate of 4.93%.
This bill also eliminates the state alternative minimum tax.