Maine taxpayers were granted some relief by the legislature and Gov. Janet Mills in the session that just concluded, but that does not mean they will see much in the way of any real cash. People in some communities may actually see their property taxes go up.
As the legislative session ended and Mills signed the two-year state budget into law, she drew attention to new laws and provisions aimed at lowering taxes.
“In this budget, we provide more property tax relief to hard working Mainers,” says Mills.
That relief, she says, will come in the form of increased state funding for schools and a boost in state revenue sharing. But school funding is distributed through a complex formula that provides less funding to cities and towns with high property values. Revenue sharing sends a percentage of state sales and income taxes to the cities and towns on a per-capita basis. But, nothing in Maine law requires any of that money to be used to lower property taxes, and a study by the Maine Heritage Policy Center, a conservative advocacy group, found that it rarely is.
“Between 2010 and 2015 in that report we found no evidence of decreases in property taxes even though the amount of revenue sharing increased,” says Center analyst Adam Crepeau.
Crepeau says the organization has long argued that the best way to provide tax relief is though lower income taxes — so that less money is collected by the state in the first place.
But Sarah Austin, an analyst with the progressive Maine Center for Economic Policy, says local municipal officials are scrambling to find a way to pay for unmet needs, including investments in local infrastructure long delayed by the recession.
“There is a very large hole that has been created by years of underfunding at the local level,” Austin says.
Austin says programs like revenue sharing may not bring down property taxes, but they can help prevent taxes from going up. She believes an increase in the homestead exemption, which lawmakers approved this year, will help some property taxpayers.
“What homestead does is shield a certain portion of your homes value,” says Austin. “So it was $20,000 of your home value that you were not paying taxes on, if it was your primary home. Now the budget increased that to $25,000 that you don’t pay taxes on.”
But Adam Crepeau of the Heritage Policy Center says the benefit may only last a year or two, as towns make upward adjustments in the local property tax rates.
“If towns and cities continue to increase their property taxes, they may not see that reduction anymore,” Crepeau says.
Lawmakers also made the property tax credit available to more Mainers. That’s a credit on the state income tax that Mike Allen, the associate commissioner for tax policy, says could provide a significant benefit to low income Mainers that qualify.
“With this change we are talking about an average benefit potentially of over $500, possibly $600 property tax relief benefit directly from the state,” says Allen.
And Allen says a change made to the tax relief fund established a few years ago will likely mean a check worth a little over $100 to every taxpayer at some point this year. The fund was originally set up to provide for a cut in the personal income tax rates once the balance in the program reached $30 million. Allen expects that will be reached this year.
But Crepeau repeats his case for lowering income tax rates as the best approach to providing real relief.
“I think that would have had a wider net and probably would have affected people more than a hundred dollars,” Crepeau says.
Lawmakers carried over hundreds of bills to the January session of the legislature, and some are aimed at providing property tax relief. Their fate may depend on whether the Maine economy, and state revenues, continue to grow.