Top Takeaways:
- Maine increases cigarette tax to $3.50 per pack, the first hike in two decades, generating over $110 million in revenue.
- New taxes on streaming services and pensions broaden revenue sources, part of a $320 million supplemental budget addressing Medicaid deficits and social services.
- Governor Mills emphasizes trade-offs, saying the package supports health care, education, and housing, despite criticisms that it burdens lower-income residents.
Maine Gov. Janet Mills has signed a $320 million supplemental budget into law that includes a significant increase in the state’s cigarette tax, recreational cannabis, a new tax on streaming services, and the phase-out of pension-related tax breaks for higher-income residents.
Approved Monday, the cigarette tax will rise from $2 to $3.50 per pack, marking the first such increase in two decades. The tax on recreational cannabis will rise from 10% to 14%. The change is projected to generate more than $110 million in new revenue.
In a statement, Mills described the legislation as “the product of various tradeoffs and compromises,” and said the funds would help address a shortfall in Maine’s Medicaid program while boosting support for housing, education, and mental health care.
The supplemental budget passed with only Democratic support after facing opposition from Republicans and several progressive Democrats. Critics, including Republican leaders, argued the tax hikes would disproportionately impact working-class residents and small businesses. Due to the lack of a two-thirds majority, the budget’s provisions will take effect 90 days after the Legislature adjourns.
The cigarette tax increase drew praise from public health advocates, who have long pushed for higher tobacco taxes as a way to reduce smoking, particularly among youth and low-income adults. Maine joins several other states that have recently raised tobacco taxes to support healthcare and prevention efforts.
Lawmakers had initially proposed a more aggressive restructuring of the state’s income tax system to reduce the number of tax brackets from seven to five, but that effort was dropped amid negotiations.
