In the 1960s, when Maine had poorly paid teachers, decrepit high schools, and the lowest incomes in New England, it made little sense to increase property taxes to provide better schools.
So Gov. Ken Curtis, with the aid of key Republican legislative leaders, enacted a progressive income tax in 1969 that lowered property taxes and improved public education. Revenue sharing — 5% of income and sales tax revenue — was set aside for towns and cities.
The income tax was an instant hit. It shifted the burden to wealthier taxpayers and corporations, and proved so popular that a 1971 referendum to repeal the new tax was rejected 3-1.
Since then, the “property tax relief” mantra retains bipartisan appeal, as more and more programs were added, higgledy-piggledy.
The “circuit breaker” program was designed for low-income homeowners. It was later expanded to include renters, expanded again and finally rolled into income returns, eliminating a cumbersome application form.
Then lawmakers added the homestead exemption, mostly, but not entirely, state-funded, with the rest borne by municipalities.
By the 1990s, business got into the act. Gov. Angus King installed a reimbursement program known as BETR for all municipal “personal property,” or business equipment taxes. It applied only to new investment, but grew rapidly, and by 2003, when Gov. John Baldacci took office, he faced a choice.
Instead of curtailing or ending the program, Baldacci decided to repeal the tax, and reimburse municipalities only 50% — the constitutional minimum. He also created Pine Tree Zones, offering lower corporate taxes in areas with high unemployment.
That made some sense, but the Legislature soon expanded the program statewide. It lost its original purpose, and cost more.
Meanwhile, reviews by OPEGA, the Legislature’s watchdog, never found any quantifiable benefits from the business giveaways. No matter; the programs go on and on.
Now, we have yet another “tax relief” program, produced through a 2021 bill by Sen. Trey Stewart, an ambitious young Aroostook County Republican who’s now minority leader.
It allows taxpayers 65 and up who’ve paid property taxes in Maine for 10 years to freeze their assessments, permanently, so their property taxes will never go up even as their neighbors’ do.
It’s a scaled-down version of California’s Proposition 13, the leading edge of the “Reagan Revolution” promoting tax-cutting, especially rates for high-earners.
Proposition 13, despite its popularity in California, hasn’t been emulated elsewhere — until now. It’s prized by those who keep their homes a long time, though they lose the considerable benefit if they sell and buy another home.
It’s unfair to other property taxpayers, who pay more so long-timers can pay less. Though it’s of dubious constitutionality, treating taxpayers unequally, courts declined to overturn it.
Maine’s program may be even worse, because it doesn’t focus on a particular property. If you sell your house and move, you can apply it to the new one, since a single 10-year period of residency is sufficient.
Stewart’s bill got little attention from press and public; Gov. Janet Mills could have vetoed it because it wasn’t widely understood, but she let it become law without her signature.
Towns and cities are applying it for the first time, and finding it difficult. The program has no means test — you can be a billionaire and still receive benefits — which was supposedly done to make administration simpler.
The new program is undeniably popular, with 41,000 applications. Who doesn’t like to save money?
Still to come is the Legislature’s decision on how much to repay municipalities for lost revenues. Will it be like BETR, a 100% reimbursement, or Baldacci’s BETE, at 50%?
Unquestionably, it will be a big new expense at a time other relief programs, especially school funding, are at record levels. Something will have to give, though currently strong revenues may postpone the reckoning.
Rather than continually providing “relief” that’s never enough, wouldn’t it make more sense to assess income and sales taxes partly through counties and municipalities, as most states do, setting rates by local option?
Such a system could be crafted to incentivize regionalization of schools, fire and police services, something Maine still badly needs. It would raise revenue closer to where it’s spent, always a desirable goal.
The state budget has become a large cash register, with well over half of state revenues disbursed to property tax relief. Meanwhile, important services such as the state university system are chronically under-funded, even though — unlike business tax breaks — universities are a proven source of job creation and economic growth.
We’ve gone down the “relief” road a long, long time. It’s time to consider a different route.
Douglas Rooks, a Maine editor, commentator and reporter since 1984, is the author of three books, and is now researching the life and career of a U.S. Chief Justice. He welcomes comment at: drooks@tds.net
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