The Tax Foundation is the nation’s leading independent tax policy research organization. Since 1937, our principled research, insightful analysis, and engaged experts have informed smarter tax policy at the federal, state, and local levels.
ON THE EFFECTS ON MAINE TAXES
FEDERAL TAX CUTS AND JOBS ACT
Office of Tax Policy
Maine Revenue Services
Department of Administrative and Financial Services
The Tax Cut and Jobs Act (TCJA) is the most significant overhaul of the federal tax Code since the
Tax Reform Act of 1986. The new law has wide-ranging implications on individual and business
taxation, including a new international tax regime. Furthermore, the TCJA has a broad effect on the
states, many of whom—Maine among them—have historically sought to “conform” to the federal
tax Code, or “the Code.” For context, following the 1986 reform, 39 of 40 states with an income tax
conformed in 1987; the last one followed suit in 1988.i As a result of prior conformity efforts—and
direct linkages between Maine’s tax law and the federal tax Code—changes to the federal system
stand to affect significantly the state taxes that Mainers pay and revenues flowing to our state.
TCJA Effect on Federal Tax Burden in Maine
Beginning with a broader view of the federal reform bill’s effect on our state, it is helpful to view the
law’s component parts. Even absent conformity actions to recouple Maine’s tax law to the federal
Code, the TCJA has a broad impact on Maine households, small businesses and corporations.
According to estimates by the Institute of Taxation and Economic Policy (ITEP), the new law
provides an overall economic benefit to Mainers of approximately $1 billion in 2019.ii $563 million
of that would be in the form of federal income tax cuts for Maine individual income taxpayers,
which aligns with MRS estimates.iii Maine pass-through businesses would receive another $198
million in federal tax cuts, and there would be a corporate benefit of $293 million.
By contrast, it is important to note that the change to the state and local tax deduction has the
opposite effect on certain Maine taxpayers. In limiting the state and local tax deduction to $10,000,