September 26, 2013

“No taxation without representation,” said Patrick Henry about English taxes on the colonies, which became a hue and cry of the American Revolution.

Many people throughout Maine are asking why the LePage administration is not representing them when it comes to creating a fair tax system. After all, when this governor ran for office, his platform was to abolish taxes, but since he’s been in office, taxes have increased for all but 1 percent of the population. And the tax that will dramatically go up the most is also the most regressive tax Maine has — property tax.

“The message coming out of Augusta is more taxes and less services— the worst of all situations,” said Bangor City Councilor Joe Baldacci. “What we need is a fairer tax system to help Maine’s middle class and job creation to reduce the need for government services.”

The elimination of the circuit breaker property tax relief program —

This year, lawmakers repealed the Maine Residents Property Tax and Rent Refund Program, known as the circuit breaker swapping it for a credit, which will help 75,000 less people. Yet this new program is called a “tax fairness credit.”

That’s right, 75,000 residents won’t get the help they need to pay their property taxes. The program had about 89,000 recipients in fiscal year 2012. The circuit breaker provided a tax refund ranging from $479 to $1,600 according to Maine Revenue Services.

Those Mainers who still qualify for the new program would receive a maximum tax credit of $300 a year or up to $400 if they are 70 or older. But the replacement tax credit isn’t available until 2014. In addition, homeowners who thought they were going to receive a circuit breaker refund this August won’t receive one at all. Receiving the credit is harder too. Any homeowner who applies for the credit must file a state income tax return, even if the person receives only Social Security income.

So this year, residents will see their property taxes and sales taxes increase but will not get property tax relief from the circuit breaker as it no longer exists. Many homeowners are worried about how they will pay for home heating, food, prescriptions, and increased property taxes.

With this so-called “tax fairness credit,” there will undoubtedly be those who can’t pay their property tax bills, thus putting a further strain on local towns to pay their debts, which have increased because of LePage budgets.

The back door LePage budget policies that increased property taxes —

Governor Paul LePage’s budget shifted about 35 percent of program expenses from the state to local municipalities. Lawmakers only agreed to a compromise because of the threat of a state government shut down. Time ran out.

Reasonable voices were lost in the final hours of the legislature as the fear of a shutdown loomed. Those voices cried out to put the tax breaks the LePage administration gave 1 percent of Mainers temporarily on hold so they wouldn’t be implemented in this budget cycle. Instead, lawmakers agreed to some drastic cost shifting and increased the sales tax by .5 percent, temporarily, and the lodging tax.

Rep. Peggy Rotundo, House chairwoman of the Appropriations and Financial Affairs Committee, said at that time, “A government shutdown would not serve anyone.”

These tax cuts designed for the wealthiest Mainers, the 1 percent, were pushed by Governor LePage and forced through by a Republican-led statehouse when LePage moved into the Blaine House, and now the middle class and poor are paying for them.

Because these tax cuts for the 1 percent started coming due in January and levies placed on multi-million dollar estates were dramatically cut, the self-imposed LePage administration budget crisis unfolded. Dubious accounting out of the Department of Health and Human Services, which is under investigation, added to the situation.

This year, working families will be pushed to the extreme with higher property taxes, while towns and cities are destined to carry way too much of the burden for necessities in education, public safety, transportation, and for finding ways to fund their own economic development.

Granted, LePage did lower income tax slightly, ever so slightly, for the average taxpayer who might save at least $200, which pales in comparison to how much property taxes will increase. The reality is any savings made will be wiped out by property tax increases.

But not for that 1 percent of Mainers as they will come away with saving $1,742 and more if they no longer are subject to the estate tax.

The impact of these 2011 cuts in the estate tax and income tax will continue to affect every budget that comes out of Augusta, and it’s likely more services will be cut.

By making towns pay more for services, economic development will suffer—

By late spring, Moody’s, the national credit rating agency, warned that shifting costs, normally undertaken by state government to municipalities, would raise property taxes and that action would have a negative effect on business investment.

“The decisions made in Augusta directly hurt all of Maine’s towns and cities and most particularly the working middle class homeowners, who really are the foundation of any community,” said Baldacci.

The principal factor is the state’s cut to revenue sharing with local municipalities.

“Maine’s local governments are already challenged to attract commercial taxpayers to diversify their primarily residential tax bases; rising property tax rates will only increase this struggle,” the analysts wrote.

Moody’s reported that the drop in revenue sharing will increase a city or town’s dependence on property taxes and that would put pressure on economic development and public services, making the budget a “credit negative.”

The Moody’s analysis found that the state government has distributed an average of $110 million annually to municipalities over the past 10 years, peaking in 2008, before the recession, at $133 million. In 2013, revenue sharing stood at $95 million and, with the current policies in this two-year state budget, is set to decrease to $60 million by fiscal year 2015.

Restoring municipal revenue sharing and cuts to property tax relief programs that mostly benefit working families should be a high priority when lawmakers return next year. They could even think about creating a fair tax system by eliminating those tax cuts for the 1 percent.