Maine has long had one of the highest income tax rates in the country. Prior to Tax Reform our top rate was 8.5%, making us 7th highest.
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The tax reform enacted last year cuts Maine's top rate from 8.5% to 6.5% (with a 0.35% surcharge for incomes over $250,000 a year) moving Maine down to 17th place in the rankings. The median top rate in the nation is 6%.
The current income tax structure is even worse for Maine taxpayers than the state rankings suggest: an individual taxpayer in Maine reaches the 8.5% top bracket with taxable income of only $20,150. Only Oregon has a lower top-rate trigger. In the other states with top brackets higher than 8%, the highest individual tax rate is not imposed until the taxable income levels shown in the above table are reached.
The tax reform law replaces the traditional deduction/exemption approach for calculating income tax with a new 'household credit' method that can offset part of the top rate (6.5%) on a declining scale for individuals all the way up past $90,000 and for a family of four to over $240,000 of income. Because of the credit, we are left with a more progressive income tax package than we had before tax reform.
A state's income tax level is one of the key tests for companies checking out locations for new plants and offices and considering transferring employees from other states. More importantly, it is almost all paid by Maine residents, and virtually every dollar cut from the ridiculously high rates of our old income tax schedule comes as savings to us!