What tax relief?

Moments after the early morning adjournment of the Maine Legislature’s first regular session the flurry of press releases from Governor Janet Mills and legislative membership landed in electronic mailboxes. The public statements deservedly trumpeted the tri-partisan achievement of enacting the state’s fiscal year 2020-2021 $8-billion budget on schedule. Included among the achievements listed in these statements was the pronouncement that the state budget includes funding that will deliver property tax relief to Mainers.

Governor Mills comments that “the budget expands health care, improves Maine’s education system, provides property tax relief and invests in the state’s Rainy-Day Fund.” House Speaker Sara Gideon states that “the budget … brings desperately needed property tax relief to Mainers.” Senate President Troy Jackson declares, “This budget answers Maine taxpayers’ call for property tax relief without leaving towns in the lurch.”

The Governor and legislators believe they wield the power to direct, incentivize, bribe or bully the nearly 500 municipalities in Maine to lower property taxes. History proves otherwise.

The Governor and Legislature adopted a two-year budget that does significantly increase the amount of state revenues earmarked and directed to towns, cities and school districts to support local budgets. But municipal officials will decide how best to apply the increased funding from the state. We have not yet received a matching flurry of press releases from local governments touting the same assurances of property tax relief as those from the state leaders.

Revenue sharing is a monthly distribution to the towns from the state government’s sales, service provider, personal and corporate income tax receipts for the month. The new budget increases revenue sharing from 2.5 percent to 3 percent next year and 3.75 percent of revenue in the following year. Revenue sharing is a stream of revenue, like the vehicle excise tax, available to the local community to spend as they see fit.

The new budget also increases the homestead exemption for Maine residents who have owned a home for more than a year and occupy it as their permanent residence. It exempts part of a home’s value from tax calculations, reducing the homeowner’s tax bill. The new budget increases the exemption by $5,000 to $25,000 and increases the back-end reimbursement to the towns. The homestead exemption is more of a property tax burden shift than a relief program. The exemption effectively shifts a portion of the property tax burden from the primary residence to other property taxpayers such as business, commercial and seasonal property owners.

The budget continues the steady annual increases of state funding for K-12 public education with an additional $115 million. That’s good, but the expectation that the state’s increased level of funding for public education translates to a property tax reduction is a promise state government is powerless to impose.

The Maine Property Tax Fairness Credit is the only state program that delivers direct property tax relief and does so in an efficient and effective manner. The refundable tax credit provides a tax reduction or direct payment to Maine property owners and renters who qualify based on their property tax to income threshold. The Maine Property Tax Fairness Credit delivers on the promise of state-sponsored property tax relief.

Leave a Reply

Your email address will not be published.