Maine Gov. Janet Mills on Friday put her seal of approval on a supplemental budget bill that includes a “millionaires’ tax.” The new tax levies a 2 percent income tax surcharge on income over $1 million ($1.5 million for joint filers and heads of households), making Maine’s tax system fairer while raising revenue to support families, workers, and students in the Pine Tree State.
The tax is reminiscent of another surcharge that Mainers approved at the ballot box in 2016. The measure, known as Question 2, would have created a 3 percent surcharge on income over $200,000, with the revenue from the tax earmarked for education. Ultimately, however, then-governor Paul LePage signed the state budget, which included the repeal of the initiative – a move that went against the will of the voters.
Fast forward to today and Maine’s new surcharge comes on the heels of a new millionaires’ tax in Washington, and a growing interest in taxing the rich in states like Connecticut, Maryland, Massachusetts, Minnesota, Vermont, and Rhode Island, which all have either recently taxed or are considering taxing high-income households to responsibly fund the services state residents want and need.
While Maine’s tax system is currently progressive through the bottom of the income distribution, it is regressive at the top of the income scale with the top 5 percent paying lower rates than working-class Mainers. The millionaires’ tax will help address this inequity while raising nearly $100 million in new revenue in fiscal year 2027.
The new tax is paired with other tax and budget changes. For instance, the budget bill also increases the state’s maximum Property Tax Fairness Credit for people under 65 from $1,000 to $1,500 and will provide one-time payments of $300 to those earning $50,000 or less for single filers ($100,000 for joint filers). Meanwhile, the new revenue from the millionaires’ tax will, among other things, help make community college free for Maine residents and increase minimum salaries for public school teachers. On a permanent basis, the millionaires’ tax and enhanced Property Tax Fairness Credit provide important steps toward a more equitable tax system in Maine.
The millionaires’ tax follows the passage of the Trump tax law in 2025, which imposed a slew of tax changes that provide outsized benefits to the wealthy and made far-reaching cuts to programs like SNAP and Medicaid. In Maine, the average annual tax cut under the federal law for the richest 1 percent exceeded $34,000. Lawmakers in the state, including Gov. Janet Mills, have noted that the state’s recent changes seek to undo some of the harm of these federal policies.
To that end, Maine’s budget bill also wisely decouples from costly depreciation changes; the Opportunity Zone program; poorly targeted exemptions for tipped income and overtime pay; and a provision that provides tax breaks for venture capitalists via the Qualified Small Business Stock (QSBS) exclusion. Maine joins many other states choosing to disconnect from these federal policies, rather than fully mimicking the federal changes. The state will also invest $28 million in SNAP and health care programs to ensure residents do not lose support.
As inequality runs rampant and affordability remains a top issue that Americans face, taxing those at the top and investing in education and working families will help reduce inequality, improve affordability, and build stronger, more stable communities.
