(The Center Square) – A plan to exempt thousands of Maine businesses from state taxes on federal disaster loans was approved Thursday evening after legislative leaders reached a deal on a supplemental budget .
House Republicans agreed to put aside demands for further tax cuts hours after overnight talks with Democratic leaders resulted in an agreement on the $ 258 million spending program. Republican support was crucial for the two-thirds majority needed to approve the spending bill. An earlier version of the budget was rejected on Thursday.
The supplementary budget, which aims to keep the state in business until July, included key provisions to eliminate state taxes on the federal paycheck protection program for the more than 28,000 small businesses that received disaster loans; and exempting the first $ 10,200 of federal unemployment benefits received in the last year by the unemployed from state income tax.
Democrats and Republicans reached an earlier agreement to include around 250 companies that were not covered by the tax exemption plan. The state Senate on Wednesday approved the compromise bill. But House Republicans rejected the plan Thursday after failing to secure concessions on several other state tax code changes to provide more relief.
Gov. Janet Mills, who tore Republicans to pieces for rejecting the budget on Thursday, praised them a day later for coming to a deal. She warned that the deadlock was putting businesses and taxpayers at risk as tax filing deadlines approached.
“I commend the Democratic and Republican leaders for taking action last night to reach a sensible bipartisan deal,” Mills said in a statement Friday. “As a result of this compromise, 160,000 unemployed Maine workers and 28,000 Maine businesses that have received PPP funds will benefit from significant tax relief.”
House Republicans have announced the approval of the budget deal as a victory for struggling taxpayers and businesses in the face of the continuing impact of the pandemic.
“Maine employers and their employees have come along with our call and have convinced the Governor and Democrats in the Legislature to see the wisdom in supporting the people who will lead our economic recovery,” said Republican House Leader Kathleen Dillingham, R-Oxford, in a statement. “Ultimately, we congratulate our fellow Democrats, President Fecteau’s leadership and his willingness to listen to achieve a bipartisan result.”
More than 28,000 Maine businesses have received about $ 2.2 billion under the first round of the loan program, according to data from the US Treasury.
Congress exempted canceled PPP loans from federal taxes, but Maine is one of 18 states where the loans were required to be taxed, according to the Washington, DC-based Tax Foundation.
Exempting companies that have received PPP loans will cost the state around $ 100 million in lost tax revenue, according to state revenue officials. The unemployment benefit tax exemption provision will cost the state around $ 47 million.
House Republicans have said they plan to table a tax exemption proposal similar to the unemployment exemption that will provide tax relief to other taxpayers.
Representative Sawin Millett, R-Waterford, said tax breaks should be offered to grocery store workers, teachers, healthcare workers and others who have remained on the front lines during the pandemic.
“We are all in the same boat and our fiscal policy, entering into the biennial budget, must reflect this important reality,” he said in a statement.