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Michael Cianchette is a Navy reservist who served in Afghanistan. He is in-house counsel to a number of businesses in southern Maine and was a chief counsel to former Gov. Paul LePage.
Maine’s new paid family leave law is scheduled to start offering benefits in May 2026. But, inverting the famous phrase of J. Wellington Wimpy, Augusta will gladly make you start paying in January.
It has been a major issue percolating beneath media headlines for months. Employers expressed significant concerns with the design of the paid leave program at the proposal stage. It became law in 2023 with Gov. Janet Mills’ signature, including a new payroll tax.
Since then, the Maine Department of Labor has been trying to write rules to govern the program. They have gone through numerous revisions. Final rules only landed a couple weeks ago.
The hand of government is getting ready to taketh away from paychecks.
Starting in January, a new 1 percent payroll tax begins. Employers are legally required to shoulder half of it, while workers can be legally required to pay the other half.
When are benefits available under the program? Right now, they are scheduled for May 2026. Augusta will gladly make you pay today for that future perk.
Legislative Republicans are drawing attention to this challenge, submitting legislation to stop the new tax from taking effect. Telling hardworking Mainers to pay new taxes now for a potential benefit sometime next year if they qualify is a big ask.
It also highlights some of the challenges of our current state tax regime.
One of the headlines in the Bangor Daily News this week highlighted the housing challenges in Stonington. Snowbirds and out-of-staters bought existing properties to use as second homes. Which means they stopped being available for year-round residents.
Their story was not unique. Maine has the highest percentage of second homes in the country. And you know what? I’m guessing a huge percentage of those owners are not paying into the paid family leave pot.
Instead of trying to really reform our antiquated tax system, Augusta just decided to graft a new tax onto every Mainers’ paycheck. Every dollar that Augusta tries to raise from income taxes or draw out of paychecks, the narrower they make the tax base.
We have the lowest median annual income in New England, nearly $8,000 behind Vermont and $23,000 behind New Hampshire. We have the fifth-highest health insurance premiums in the nation. Our median home prices are higher than Vermont and on par with Connecticut.
In short, we don’t earn a lot but it is really expensive to live here. And Augusta makes it more expensive when they take more taxes out of incomes and paychecks.
As the new Legislature gets ready to begin its work in earnest, reconsidering the new payroll tax is worthwhile. Then, reconsidering our reliance on taxing Mainers’ incomes and paychecks should be the second order of business.
Retired snowbirds are generally smart enough to establish residency in no-income tax states, such as Florida or Texas. Maine Revenue Service offers a guide explaining how income tax residency works. If you follow it closely, it also tells you how to avoid becoming a Maine resident subject to income taxes.
The major step is spending at least 183 days a year elsewhere. For those six-plus months they are away, not only are they avoiding Maine income tax, they are also not paying sales taxes, eating at local restaurants, or volunteering in Maine communities. They are also not living in the second homes they own in places like Stonington or paying into the paid leave pot.
Maine’s new leave law is undoubtedly a well-meaning program. Yet, when the taxes begin today for a far off benefit, when state finances are already bursting at the seams, and when we’ve built our tax edifice on the backs of people unable to leave for six months-plus-one-day, it all deserves a rethink.
Democrats’ vote margin over Republicans in the Maine Legislature is pretty narrow. Gov. Mills has expressed real concerns over Mainers’ tax burden. Maybe this is the year they can get something done.
