Bangor, Maine, might be forced to raise property taxes next year because of LePage's budget proposal. If passed, all Maine towns and cities will carry the burden of no more state revenue-sharing — meaning they will have to pay for certain needed services without state funds. Photo by Ramona du Houx
Proposal will make property taxes and sales tax skyrocket
By Ramona du Houx
People across the state, across the political spectrum, have noticed that while Gov. Paul LePage has been in office their property taxes have risen. But how many know the culprit has been the governor’s budgets that have made drastic cuts to municipalities by slashing state revenue-sharing funds? Without this needed source of money, cities have had few options to pay for the services they provide. Many towns have laid off first-responders, cut services to people, and increased property taxes.
And the cycle could get worse if LePage is able to steamroll this $6.3 billion, two-year state-spending package through the Legislature. The governor is doing his best to sell his budget as a plan that brings tax relief to Maine families and small businesses. But the opposite is the reality.
The tax cuts contained in the governor's budget proposal will benefit the wealthy and larger corporations, while raising sales and property taxes for the majority of Mainers. Overall, LePage is trying to drastically reduce corporate taxes, cut personal income tax rates, while broadening and increasing the sales tax, eliminating the home mortgage deduction, the homestead exemption for people under age 65, municipal revenue sharing, and the estate tax.
His budget hits the middle class hard. What people may save with a lower tax rate they still will have to pay through increased property taxes.
Concern is being raised about the proposed elimination of municipal revenue sharing, next year, which would directly result in property taxes skyrocketing. All of Maine's 432 cities and towns would be drastically hit.
“We have already lost $8 million over the last three years. We will have to be prepared to deal with losing a minimum of $3 million a year from here on out. These cuts don't hurt wealthy people; these cuts hit middle-class homeowners, middle-class parents, and all citizens who would like to see adequate police, fire and public works in their town or city,” said Bangor City Councilor Joe Baldacci. “We should be focusing on long-term investments that will grow our economy with bonds. We must invest in our workforce and families with an increase in the minimum wage, job training, early childhood education, affordable higher education, and property-tax relief."
Under LePage's plan, the top corporate income tax rate would decrease to 6.75 percent from 8.93 percent. Most of the big corporations are not Maine-based.
Citizens who make the most will pay less than those in the middle-class taxpayer bracket.
Economists have pointed out that this formula means the middle class will ultimately be paying more in taxes, not to mention the inevitable property-tax increases they will have to pay as well.
LePage’s plan projects into 2019, where he wants incomes of:
- $9,700 to $50,000 to be taxed at 5.75 percent
- $50,000 to $175,000 to be taxed at 6.5 percent, and
- $175,000 up to be taxed at 5.75 percent.
It’s easy to see how hard — and unjust — it would be for a taxpayer making $9,700 to $50,000 to have to pay the same percentage in taxes as someone earning $175,000. For example a teacher making $25,000 would have to pay the same tax rate of 5.75 percent — the same rate the top 1 percent of Mainers earn.
In addition, the 31 percent of Mainers who itemize deductions on their state tax returns will lose that provision, as it too is being eliminated.
“The governor's tax proposal isn’t a tax cut — it’s a tax shift that will place an unfair burden on middle-class Mainers who are already struggling to get by," said Former State Senator Phil Bartlett, chair of the Maine Democrat Party. "This budget will only further increase income inequality in our state."
A state budget should strengthen communities, support vulnerable residents, and build a vibrant economy.
“Prioritizing tax cuts for the top 1 percent and corporations is a failed prescription for growing Maine's economy. They will also trigger harmful cuts in health care for children, the elderly, and the disabled, delay essential repairs to our crumbling roads and bridges, and undercut a good education for our kids,” said Executive director Garrett Martin of the Maine Center for Economic Policy (MECEP). "The experience of other states that have followed a path that prioritizes tax breaks for the wealthy and corporations shows that this is an ineffective, fiscally irresponsible strategy for growing the economy. Those states have not realized significant economic benefits but have cut programs families and businesses value, increased property and sales taxes, and had their credit ratings downgraded.”
The sales tax increase on services —
The sales tax increase will hit home for every Mainer doing everyday things and hurt small businesses, as it jumps to 6.5 percent, and services it covers would expand significantly.
- No longer would the services of a lawyer, financial planner, or accountant be sales-tax-exempt.
- Pest control, snow removal and landscaping, haircuts, nail and skin care, or event planning no longer would be tax-free.
- Tax would be added to the cost of movie tickets, ski and golf outings, and gymnastics, art and music lessons.
LePage’s plan includes a hefty property-tax increase for large nonprofits —
Hospitals, colleges and private schools could suddenly be paying property taxes, in the second year of the budget, to help offset the elimination of municipal revenue-sharing. But the amount of revenue collected would not cover all revenue-sharing for smaller towns without any big nonprofits, and it’s doubtful they could cover the costs of Portland.
Educational institutions say that such a measure would impact the quality of education they provide.
“These institutions are a major industry in many localities, create significant local economic activity, and provide cultural benefits to their communities. Without the property-tax exemption, Maine private nonprofit educational institutions would be placed at a competitive disadvantage with other states’ institutions and with the public colleges of Maine. The state should not be in the business of picking winners and losers,” read a statement by the Maine Independent Colleges Association.
“A new tax would push college costs higher and would, ultimately, diminish our ability to raise the educational attainment of the region’s economy,” said Laurie Lachance, president of Thomas College in Waterville and former state economist during Gov. John Baldacci’s administration.
As for the hospitals right now, some are complaining that the state didn’t accept federal funding for health care. They were planning on the Medicaid funds, because they would have been the benefactors of much of the funding to pay for the hundreds of walk-in cases they have to accept in emergency rooms.
LePage's provision that eliminates the state tax deduction for charitable contributions compounds the burden placed on nonprofits; meanwhile corporations will get a windfall.
LePage’s handout to large corporations comes with no guarantee that they will increase business in Maine — while nonprofits have helped the communities they are in for decades with educational and cultural offerings, as well as healthcare. If these nonprofits are forced to pay property tax, that community bond will be damaged.
LePage claims to have saved more than he actually has from all of his cuts to public assistance programs put together. Let’s not forget the unmeasured cost of the lives ruined by those cutbacks.
When he slashed the Temporary Assistance for Needy Families and cut off support for 3,000 families, the state only gained $2.5 million a year, according to the governor’s own projections. The cuts to General Assistance for immigrants that LePage pushed through are due to affect 1,000 families and save just $1 million, according to his office’s estimates.
The 2011 budget eliminated the tax for individuals earning less than $5,200 annually and cut the top tax rate to 7.95 percent from 8.5 percent. That $5,200 will be raised to $9,700 in 2016 under the proposed budget. However, the Earned Income Tax Credit for low-income residents would disappear. The EITC is a lifeline for many families.
In the past the governor’s proposals have changed when Democrats controlled both the Senate and House, and last year part of the Circuit Breaker, which helps low-income home owners pay their property taxes, was reinstated, after being striped by the previous Republican-controlled State House. Now the Republicans are in charge of the Senate.
Middle-class workeres will pay more taxes, as a percentage of their income, than Maine's 1 percent top earners under LePages tax shift. Those making over $50 thousand will pay a higher tax rate than those making over $175,000. Photo by Ramona du Houx
The budget goes first to the Appropriations Committee to be worked on by lawmakers and adjusted. “Our committee will be poring over the details of the budget, with a focus on protecting Maine families, seniors, and our schools,” said Rep. Peggy Rotundo, the House chair of Appropriations. “I’m optimistic Republicans and Democrats can work together to craft a fiscally responsible budget. I do have concerns, as I look at the budget, particularly the cut to the Drugs for the Elderly program, which helps so many seniors across the state afford their medicine.”
LePage proposes to cut the Low-Cost Drugs for the Elderly Program by more than $1.2 million over two years.
Some of the other items in the proposed two-year budget that stand out:
The budget would reduce state funding for teacher retirement costs by about $35 million in fiscal year 2016 and $31 million in fiscal year 2017. Continuing LePage’s efforts to shift a percentage of retirement costs to municipalities. Up until his biennial budget two years ago, which shifted 5 percent of those costs to towns and cities, the state was paying teacher retirement costs 100 percent.
The state never reached the voter-mandated goal of paying for 55 percent for local education. Education funding was cut during the last four years. Now LePage proposes flat funding for education. He is also trying to introduce a process where schools will have to apply for competitive grants to help school districts consolidate their administrations.
The governor proposes allocating $1 million in each of the next two years to fund legal challenges by the his executive branch, when the attorney general declines to represent the state.
Health and Human services:
There is increased funding proposed for Riverview Psychiatric Center in Augusta, which has lost its certification from the U.S. Centers for Medicaid and Medicare Services, when the LePage administration failed to meet federal standards. The facility is now scheduled to loose $20 million annually in federal funding.