Stateline Story

'Maine Miracle' Faces Challenge

While Hawaii, Oregon, New Jersey and other hard-hit states hiked personal income taxes this year to generate revenue, Maine drew national attention for doing the opposite.

Gov. John Baldacci (D) and the Democratic-controlled Legislature replaced Maine's graduated income tax system with a new, lower, 6.5-percent rate for most residents in a move that was hailed by many conservatives as the right thing to do during a recession.

"At last, there's a place in America where tax cutting to promote growth and attract jobs is back in fashion. Who would have thought it would be Maine?" The Wall Street Journal editorial board wrote under the headline " Maine Miracle ."

Today, however, comes word from the Bangor Daily News that Maine's tax changes could be challenged at the polls next year. State election officials have certified that opponents of the changes have collected enough signatures to let the voters have their say.

The tax package has drawn criticism - from Maine's minority Republicans - because it offsets revenue lost through the income-tax reduction by expanding the state sales tax so it applies to more services.

"This Democrat tax on services would result in a permanent expansion on Maine's sales tax, and Mainers are eager to repeal it," a Republican state senator said, according to the Daily News .

Tags: Economy