Janet Mills plans to reverse plan to tax federal business loans as income

AUGUSTA, Maine — Governor Janet Mills ordered her administration to find $100 million in federal money to cancel state taxes on coronavirus relief funds to businesses in a Wednesday reversal of a plan budget that has caused an outcry from Republicans and business groups.

This came two days after the Democratic governor introduced a tax compliance proposal that would require Maine small businesses to claim loans received under the federal Paycheck Protection Program as income for tax purposes. state tax, but would allow them to deduct essential expenses. The federal government decided last month to exempt loans from taxes.

Kirsten Figueroa, state budget commissioner, said extending the same benefit to businesses would cost $100 million this year, a sum Maine could not easily afford without direct government assistance. State Congresses. The administration’s proposed package would instead go through only a portion of federal tax relief, costing $11 million through mid-2023.

The plan quickly drew negative reactions from the business community. Republicans have accused Mills of unfairly penalizing the companies, while lobby groups have urged lawmakers to revise the proposal. Both factions responded positively to Mills’ planned reversal shortly after his arrival on Wednesday, while some noted that it was far from certain that federal money would be found.

“I want to work with the Legislative Assembly and others to do all we can to seek solutions that will help small businesses through this time of extraordinary difficulty,” Mills said in a statement.

Maine Senate Minority Leader Jeff Timberlake, R-Turner, said in a text message that he was “glad to have her listening to us and the business community.” David Clough, Maine director of the National Federation of Independent Business, said he spoke to Mills on Tuesday about the subject and that she was receptive and interested in the concerns he conveyed to members.

“I think the governor is aware that this is a very big issue for the small business community,” he said.

The episode gave minority Republicans in the Maine Legislative Assembly a victory in their first real fight with the governor over taxes. She won the election in 2018 after promising not to raise them, although her first two-year budget proposal the following year led to a big increase in state spending that Republicans criticized but ultimately accepted. with few other viable options.

It was good economic times, but the coronavirus pandemic resulted in an estimated $650 million shortfall through mid-2023. Earlier this month, Mills offered to address that issue as part of an $8.4 billion two-year budget, which largely keeps spending flat but adds about $400 million more. than the last budget.

Administration officials have expressed confidence that they will be able to close the gap through lower costs, better projections and federal funds, while Republicans have argued for cuts to cushion the budget. This conversation should frame the debate at Augusta this year.

The session will also be steeped in electoral politics. Mills is entering the final two years of his first term and plans to run for re-election in a potential matchup with former Gov. Paul LePage, a Republican to whom the current governor served as attorney general. He said his Wednesday reversal amounted to “looking to the feds for a bailout.”

BDN writer Michael Shepherd contributed to this report.

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