State tax issues are becoming increasingly important as states struggle to raise revenue and preserve services. Maine is no stranger to these events.  Beginning with 2010 Maine Individual Tax Return filings there will be a significant change in the way Maine income tax is calculated. The graduated tax rate schedule has been replaced with a flat tax rate of 6.5 percent. In addition, standard and itemized deductions and personal exemptions have been replaced with tax credits.  In general, the change intends to shift an increasing burden of state taxes towards the sales tax and reduce it in the area of individual income taxes.  The majority of our clients should see a slight reduction in their Maine income taxes when we file these returns in early 2011 (for 2010 taxes).  Remember that these changes do not apply to 2009.    

Sales taxes are scheduled to increase in late 2009 and early 2010.  Everyone will feel the increase from 7 percent to 8.5 percent on all prepared foods (the sales tax on restaurant meals). Also, the sales tax has been broadened to apply to certain services that were previously exempt from sales tax.  These services include amusement fees, installation, repair and maintenance services, and certain personal property services.

Both changes discussed above may be delayed or reversed by the pending people’s veto, an effort to put the policies to a public vote in the June 2010 election.