Possible Changes in Maine’s Income Tax Rates

By Stanley Rose June 20, 2025

Three significant changes to Maine’s income tax rates are in the works in Augusta, with two of them passed by the legislature and awaiting Gov. Mills’ approval (or veto), and the other cleared by the Senate and awaiting attention in the House. Following is an overview of those bills.

Corporate Maine income tax increase

On June 14, the legislature approved LD 1879, which increases the top tax rate applicable to corporations by 1.07%. There currently are four brackets, applying rates as follows:

Taxable income range		Tax
$0 – $350,000		3.5%
$350,001 – $1,050,000		$12,250 plus 7.93% of excess over $350,000
$1,050,001 – $3,500,000		$67,760 plus 8.33% of excess over $1,050,000
$3,500,001 or more		$271,845 plus 8.93% of excess over $3,500,001

LD 1879 proposes to adjust only the top bracket, changing its rate from 8.93% to 10.0% effective for tax years that begin on or after January 1, 2026. The increase is dedicated primarily to supporting various agriculture-related spending programs already existing in Maine.

Detractors point out that this bill will position Maine’s corporate rate as one of the highest in the nation. Governor Mills’ staff voiced opposition to this plan during the public hearing stage of the bill’s progression, so its odds of survival through the Blaine House remain questionable. If Governor Mills vetoes the bill, it returns to the legislature and will survive only if another round of voting in both the House and the Senate produces a level of support of at least 2/3. This seems unlikely, given the razor-thin majority that approved the bill last week.

Individual Maine income tax increase

The legislature also approved LD 229, which adds two new, higher tax rates to the top of the existing individual brackets (increasing tax on higher earners), and adds a new, lower tax rate at the bottom of the brackets (reducing tax on the lowest earners). The Maine income tax increase would apply beginning with tax year 2026.

Three different tax rate schedules currently apply to individuals, depending on whether the taxpayer(s) are single or married filing separately, married filing jointly, or unmarried and filing as head of household. We won’t present them all here, but instead will explain that for each of them, three brackets currently exist, applying higher rates to higher income levels with rates of 5.8%, 6.75%, and 7.15%. LD 229 would add a three new brackets and rates, resulting in six brackets. A rate of 5.5% would apply to the lowest taxable income levels, and two new brackets would be introduced at the top, applying rates of 7.75% and 8.95% to the highest income levels. (See, however, the discussion below regarding LD 1089, which would have the effect of adding a seventh bracket to the very top.)

As with the proposed corporate rate change described above, Gov. Mills testified against this change when the bill was pending, and she also vetoed a similar bill a little over a year ago. Like LD 1879, LD 229 was approved by the House and Senate, but not with the 2/3 level of support required to overcome a veto.

Individual income tax surcharge

At the time of this writing, LD 1089 has been approved by the Senate and is ready for reconsideration by the House. (It previously was addressed by the House but must be revisited because the Senate changed the original House version.)

LD 1089 would have the effect of adding another bracket to the top of the existing individual brackets beginning with 2025, assessing an additional 2% tax on the portions of any incomes exceeding $1 million, $1.5 million, or $2 million, earned by single taxpayers or married filing separately, head of households, and married filing jointly taxpayers, respectively. This tax would help fund education costs in Maine – specifically, the state’s commitment to cover 55% of education costs at the state, rather than municipal/district, level.

Note that LD 1089 operates independently of LD 229, meaning that if LD 1089 is passed but LD 229 fails, the top individual rate, including this surcharge, will be 9.15%. If both pass, the top rate will be 10.95%. Proponents note that the current rate structure is not progressive enough, because it applies the same rate to middle income earners as it does to very high earners. Detractors note that this change, especially if LD 229 survives, will position Maine as having one of the highest rates in the nation, and suggest that it will drive or keep some business owners away from the state. Like LD 1879 and LD 229, Gov. Mills has voiced opposition to this plan, although an earlier iteration of it proposed a 4%, rather than 2%, surcharge. The House has yet to weigh in on the current version of the bill, but like the others, the Senate vote did not demonstrate enough support to overcome a potential veto.

Conclusion

Things can change quickly, but as this article takes its own path to publishing, these bills have not finished their own gauntlet to fruition. They can track in one of three ways. (1) If Gov. Mills vetoes them, they will crawl back to the legislature, where their fates will turn on whether the House and Senate can gain enough additional support to reach approval of 2/3 of both bodies. If so, they thereby become law in spite of the veto. (2) If instead Gov. Mills approves them, they will become law. (3) The governor might take no action at all. But by neither signing or vetoing, House and Senate-approved bills become law automatically without the governor’s signature after 10 days of inaction in the Blaine House. This is called a “pocket veto,” and it doesn’t happen often, and sometimes results from features in the law that delay implementation of bills beyond the effective date that would result with a signature. But it also can be used when the Blaine House wants to position itself as opposed to a bill that is secretly supported. No one is fooled, though, with this curious feature in Maine legislative law that seemingly was derived from some song lyrics from the band Rush, who note that “If you choose not to decide, you still have made a choice.”

We will update you once we learn whether these bills will see the light of day or be lowered into the ground.

For more information, please contact Stanley Rose or your BNN tax service advisor at 800.244.7444.