Maine small businesses are struggling. As a small business owner myself, I know just how devastating and exhausting the past year has been. Many businesses are still in need of aid in spite of state and federal loans, programs and grants helping them survive. Over the course of the pandemic, multiple stimulus packages have been passed in an effort to help individuals, businesses and states stay afloat. These are taxpayer funded programs. As your representatives it is our job to be good stewards of taxpayer money.

Over the past week there has been some confusion around one of these programs in particular; the Paycheck Protection Program (PPP) which is a loan or grant available to eligible businesses. Folks seem to be most concerned with a discrepancy in how Maine and the federal government plan to handle taxation of these loans. At the time of this writing, the Mills administration is still working through some of these details and is trying to find the most economically sustainable way to provide the greatest benefit to Mainers. However, I do want to help clear up some of the miscommunication and misinformation that has surrounded this issue.

The federal government regularly runs a budget deficit, meaning it spends more money than it brings in. However, Maine’s Constitution requires us to maintain a balanced budget. The Mills administration recently submitted her plans for this upcoming biennial budget as well as a supplemental budget to the Legislature. The Legislature will refer the budget to our Appropriations and Financial Affairs (AFA) Committee which will go through it with a fine-toothed comb and make any changes or adjustments it deems necessary. While it does this work, AFA will enlist the relevant policy committees and will open up the conversation to Maine citizens by way of public hearings. With input from the policy committees as a result of these live-streamed hearings and work sessions, the AFA Committee will then formulate recommendations to the full Legislature which will then vote on the final measure.

I serve as House Chair of the Legislature’s Taxation Committee, and over the past two weeks, my colleagues and I have begun to dig into parts of the supplemental budget proposal that have to do with taxation. This is where we’ve seen substantial confusion regarding the state’s handling of the PPP loans. The most recent proposal from the Administration would treat the forgiven PPP loans as income for the purposes of determining state taxes but would also conform with the deductions offered under federal law. This will be a wash for most businesses with forgiven PPP loans, resulting in a net zero tax liability. On the federal level, businesses will get a greater tax break on top of the net zero liability Maine is providing because the federal government is permitted to run a deficit and so has the available funds.

The claim that this is a tax increase is disingenuous. Loans that are forgiven, like foreclosures, are treated as income under state and federal taxes. Meaning that they are subject to the same marginal tax brackets as income earned from wages.

However, the Governor has expressed a willingness and a desire to revisit this portion of the supplemental budget as stated on maine.gov. The problem our state currently faces is that if we are to fully conform to the federal treatment, we would need to come up with roughly an additional $100 million to balance Maine’s budget before the end of June. Governor Mills is looking to see where we might be able to pull together that sum, but it is a herculean task that would require additional support from the federal government.

In the meantime, while all of this is playing out, I want you to know that I am working diligently with my colleagues across the aisle to dig into these details and make sure that Mainers’ tax dollars are spent wisely and economically. I welcome your continued input and engagement as we work through these complicated matters.

Rep. Maureen “Mo” Terry, D-Gorham, is serving her third term in the Maine House of Representatives. She serves as House Chair of the Taxation Committee. She is a chef and small business owner with more than 25 years of experience in the food service industry. Contact her at maureen.terry@legislature.maine.gov.