MPBN: Maine Task Force Seeks to Recoup $40M in Savings from Tax Exemptions

By AJ Higgins

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The stakes are high for a legislative task force charged with identifying $40 million worth of tax exemptions to balance the state budget. Failure to do so would likely mean additional cuts in state revenue sharing funds to cities and towns. And that could raise property taxes. Although other legislative efforts at tax reform have failed in the past, lawmakers say this year could be different. A.J. Higgins has more.

Should hair stylists be required to collect a sales tax on their services? When businesses get tax reductions for opening a new office, should they continue to get a break if they don’t provide as many jobs as they promised? If a tax credit program isn’t meeting the state’s expectations, should it be discontinued? These are some of the questions facing the tax expenditure review task force.

“For a lot of folks on Main Street, this is not stuff that’s on their radar screen,” says Garrett Martin, executive director of the progressive advocacy group, the Maine Center for Economic Policy, who is a member of the task force comprised of legislators, and business and economic leaders.

The group’s job is to find $40 million worth of savings in the state budget. Should the task force fail, state law requires the state to draw down existing funds for municipal revenue sharing – money that was already depleted by $75 million earlier this year.

Geoff Hermon of the Maine Municipal Association says his organization is already hearing from a number of cities and towns that are increasing their property tax collections to offset losses in state funding.

“In my community, property taxes went up by about 10 percent this round, as well as a lot of the neighboring communities in which I live,” Hermon says. “But my anecdotal information is right now is that people are making the connection that state government and local government, financially, are joined at the hip, and when the state government makes savings cuts, it can have a dramatic effect on the property taxes.”

There are literally hundreds of expenditures that the panel will be reviewing. The progressive Maine Small Business Coalition wants the task force to close tax loopholes for the large corporations they say benefit the most from taxpayer-funded subsidies that have been written into Maine’s tax code.

Coalition director Kevin Simowitz says fewer than 4 percent of Maine’s private employers are actual beneficiaries of state tax loopholes. State Sen. Anne Haskell, a Portland Democrat, is one of the panel’s co-chairs. She says her group wants to know what tax policies are working in Maine – and which ones aren’t.

“Are there expenditures here that are not doing what they were legislatively intended to do, or may not currently be as active as we thought they were?” Haskell says. “And I think we need to take a look at those, and we’re not going to be giving out tax breaks for theoretical improvements. We’ve got to have fact-based information, and that these incentives ought to go – and I think people deserve to have these incentives go – where we know that the jobs are – and not just where we think they’re going.”

Another member of the panel, Republican Sen. Roger Katz of Augusta, says Mainers concerned about rising property taxes should see the panel’s work as an opportunity to consider comprehensive tax reform in Maine.

“I hope this will be the beginning of a catalyst next year or the year after to look at a more broad-based tax reform proposal,” Katz says. “It may be similar to the one we had this year or it may be different, but to really take a look at our whole system, which is well beyond the scope of this one committee.”

The task force is required to submit its findings to the Legislature’s Appropriations Committee on Dec. 4.