Maine joins blue-state millionaire tax club as critics warn the new surcharge punishes local economy
Maine has officially joined the ranks of high-tax blue states as Democratic Gov. Janet Mills signed a controversial new millionaire tax into law, sparking immediate warnings that the move will punish local business owners and stifle investment.
Effective Jan. 1, 2026, the new law bypasses traditional Republican opposition to implementing a permanent income tax surcharge as it was included in a supplemental budget bill. The legislation, titled LD 2212, allows for a 2% tax on individual incomes exceeding $1 million and $1.5 million for joint filers.
It pushes Maine’s top marginal rate from 7.15% to 9.15% and impacts an estimated 2,600 filers, as the new tax is expected to bring in $160 million over the next two years.
Progressive lawmakers and Gov. Mills, who previously resisted such hikes, argue the tax is a necessary response to federal policies and a way to fund "Free Community College."
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"This budget will deliver significant relief to Maine people facing rising prices because of the shortsighted actions of the Trump Administration," Mills said in a press release. "The supplemental budget gives money directly back to the people of Maine, it builds on my Administration’s historic investments in housing, it makes Free Community College permanent, it delivers more property tax relief and funding for childcare and importantly, preserves critical funding for schools and health care for the coming years."
"Those who benefit the most from our economy do so because of the people, infrastructure and communities that support that success," State Rep. Cheryl Golek, D-Harpswell, told the Michigan Advance. "Asking for a small additional contribution from the wealthiest in our state is a reasonable and widely supported step toward a fairer system."
However, in the weeks following the law’s passage, the Maine State Chamber of Commerce has warned that it functions as a tax on local entrepreneurship and retirement.
"This new surcharge isn’t hitting Wall Street — it’s hitting the sale of local businesses that have kept people working for decades. When a Maine business owner finally sells after 30 years of hard work, we shouldn't punish that moment of success," former Maine senator and business owner Brian Langley said in a news conference.
"Many Maine businesses, particularly small and family-owned companies, would feel the direct impact of higher income taxes, reducing their ability to reinvest, grow and hire," Maine State Chamber of Commerce President and CEO Patrick Woodcock added. "At a time when our economic outlook is uncertain, those resources should be focused on strengthening Maine’s long-term growth potential."
Additionally, conservative fiscal watchdogs argue that Maine is moving in the opposite direction of the rest of the country, where many states are currently slashing rates to attract residents.
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"Twenty-three states have reduced their top marginal income tax rates since 2021, while six states have gone in the opposite direction, yielding a widening gulf between high- and low-income-tax states. The modest amount Maine could collect from a high-rate income tax isn’t worth the damage to the state’s economic competitiveness," Tax Foundation’s Jared Walczak recently wrote.
Maine joins blue states Washington, Massachusetts and New Jersey in passing millionaire-related taxes. States like New York, Illinois and Michigan are examining proposals or facing stalled efforts.