Maine Enacts 2% Millionaire Tax in Defiance of Federal Austerity, Generating $160M for State Programs

Maine Governor Janet Mills signed into law a supplemental budget on April 10 that includes a 2 percent surtax on individual incomes exceeding $1 million annually, making Maine one of the first states in the current political era to explicitly raise taxes on high earners in direct response to federal spending cuts initiated under the second Trump administration. The measure, projected to generate approximately $160 million over two years, passed the Democratic-controlled Maine legislature with no Republican support and affects an estimated 2,600 taxpayers — fewer than half a percent of Maine's total tax base. It raises the state's top marginal income tax rate to 9.15 percent.

The millionaire's tax was originally proposed as a way to offset cuts to federal funding for education, healthcare, and nutrition assistance programs that began flowing into Maine following the passage of Trump's federal budget reconciliation bill earlier this year. When the revenue is no longer tied specifically to education funding, as originally envisioned, legislative leaders said the flexibility allowed them to direct money to whichever state programs faced the most acute shortfalls from Washington. Among the programs benefiting from the supplemental budget are a $10 million expansion of the state's Child Care Affordability Program, $11 million for the Eviction Prevention Program, and direct $300 payments to eligible Mainers from the state's reserve fund.

Governor Mills signed the budget in Bangor, touting the accompanying provision that makes Maine's community college system permanently free for recent high school graduates — a program the state had previously funded only temporarily through pandemic-era federal relief money. "We're not waiting for Washington to fix what Washington broke," Mills said at the signing ceremony. "Maine is going to invest in its people." The statement was a pointed contrast to the administration's messaging that federal cuts would unleash private-sector growth, and it drew applause from local educators, healthcare workers, and housing advocates who had traveled to the signing.

Polling conducted by the Maine People's Resource Center found 69 percent support for the millionaire's surtax among likely voters, regardless of political affiliation — a figure that surprised even the measure's sponsors. Representative Cheryl Golek, who sponsored the underlying legislation as LD 1089, said the polling reflected a broadly held sense that the tax burden had become too regressive and that ordinary Mainers had shouldered a disproportionate share of the economic pain from both federal austerity and inflation. Business groups and the Maine Chamber of Commerce opposed the measure, arguing it could prompt some high-income residents to relocate to states with lower tax rates.

Maine's action is part of a broader wave of blue-state legislative activity aimed at using state tax policy to cushion residents from the effects of federal funding reductions. Connecticut, New York, and Illinois have introduced or passed similar measures in recent months, while California's legislature is considering a proposed constitutional amendment that would create a dedicated wealth tax at the state level. Critics of these approaches, including economists at the Cato Institute, argue that high-earner tax increases in individual states risk accelerating outmigration without producing sustainable revenue gains, and point to Massachusetts's experience with its own millionaire's tax as a cautionary data point. Proponents counter that the revenue is real, the need is immediate, and the alternative — cutting services — is politically and morally unacceptable.