AUGUSTA, Maine — Municipal leaders and manufacturers sounded off Wednesday against Gov. Paul LePage’s two-year budget proposal during hearings on some of the package’s more contentious parts, including plans to eliminate municipal revenue sharing, suspend business property tax reimbursements for a year and cut back on residential property tax relief programs.
Well more than 100 people signed up to testify during the Wednesday afternoon hearings.
The LePage administration balanced its $6.3 billion, two-year budget proposal in part by cutting off all revenue sharing with municipalities and reining in two of the state’s main property tax relief programs, the circuit breaker and homestead exemption.
“We depend on this revenue and cannot support any more unnecessary pressure on taxpayers to alleviate state budget shortfalls,” Cathy Roberts, who serves on the selectboard in Montville, told lawmakers on the Appropriations and Taxation committees. “It is your responsibility to keep their best interest in the forefront of your decisions.”
Under Maine law, the state shares 5 percent of income and sales tax revenue with municipalities, though recent state budgets have reduced that amount. LePage’s two-year budget proposal eliminates that revenue stream for municipalities, saving nearly $200 million for the state. Municipal leaders have argued the revenue sharing cut is essentially a property tax hike, but LePage has said it’s a “local choice” to raise property taxes rather than absorb cuts by streamlining municipal governments.
But municipal leaders who testified Wednesday said they already collaborate with neighboring towns to save money. The alternatives for additional cuts are limited, they said.
“The intent is to squeeze the towns to make them think of consolidation of services with other towns,” said Louis Stack, a town councilor from Standish. “The facts are, Standish does just that.”
Some who testified suggested adding to the state sales or lodging taxes to close the budget gap and spread more of the tax burden to tourists.
A number of business representatives testified Wednesday, opposing a part of the LePage budget that affects two property tax relief programs for businesses.
The budget would end the Business Equipment Tax Reimbursement program, or BETR, which reimburses businesses for local property taxes they pay on much of their equipment. Instead, the budget would exempt businesses from paying the tax in the first place through the Business Equipment Tax Exemption program, or BETE. Under BETE, however, municipalities would be reimbursed by the state for only 60 percent of what they would have collected in taxes, rather than the full value. Over time, that reimbursement would drop to 50 percent.
In the process of transitioning businesses to the BETE program, the LePage budget would suspend property tax reimbursements to businesses for a year. Several manufacturers said Wednesday they would have trouble absorbing a one-year property tax hike.
“We just cannot afford to absorb a skip of a year’s BETR payment,” said Anthony Lyons, director of fiber supply and public affairs at Rumford’s NewPage Paper Mill, which recently announced 45 layoffs. “It’s that simple. We can’t pass it onto our customers. We spend less and we reduce our workforce.”
Property taxes are higher at NewPage’s Maine mill than they are at its similarly sized facilities in Michigan and Wisconsin, Lyons said. Any policy that increases property taxes in Maine would be “making it tough for out-of-state decision makers to think of Maine as a place to invest.”
The two residential property tax relief programs targeted by the LePage budget are the circuit breaker program and the homestead exemption.
Under the homestead exemption, anyone who has owned a home for at least a year doesn’t pay property tax on the first $10,000 of property value, and the homeowner’s hometown receives a reimbursement from the state to make up for the lost tax revenue.
The Democratically controlled 124th Legislature scaled back that program in 2009 — reducing the exemption to $10,000 from $13,000 — to balance the state budget. Now the LePage administration is proposing to limit the program to elderly homeowners — while raising the exemption to $20,000 — to save the state $9.1 million in the next two-year budget cycle.
The circuit breaker offers about 200,000 low-income homeowners and renters a maximum property tax or rent refund of $1,600. That program also has been scaled back in recent years. LePage’s budget proposal recommends limiting circuit breaker relief to elderly residents, saving the state $73.4 million over the next two years.
“Funding the circuit breaker at 100 percent is the most effective policy at reversing Maine’s overall regressive tax policy,” said Albert DiMillo of South Portland, an accountant and retired corporate tax director.