AUGUSTA, Maine — Maine Revenue Services has submitted a report to the Legislature on several of the business tax breaks on the books, but leaders of the Taxation Committee say the compilation of how much revenue was lost in providing the breaks falls short. They want a measure of how effective the breaks are in keeping or adding jobs.
“That’s not what we were asked to do,” said Mike Allen, associate commissioner for tax policy. He said Maine Revenue Services was asked to provide data on what the breaks cost, not the effectiveness of the tax breaks.
The report covers four tax credits and the Business Property Tax Reimbursement, or BETR, program. The credits are the Jobs and Investment Tax Credit, the Research Expense Tax Credit, the Seed Capital Investment Tax Credit and the Shipbuilders Tax Credit.
“The report has the number of taxpayers that claimed the credit and the dollar amount,” he said. “We are not geared up to do a job analysis beyond the minimum set out in the law, if there is one.”
For example, the Jobs and Investment Tax Credit was used by just one employer, and their identity is protected by law. That business got a credit of $489,986. Under the minimum required to qualify for the credit, the business had to create at least 100 new jobs.
Rep. Gary Knight, R-Livermore Falls, is the co-chairman of the Taxation Committee. He is concerned that only one company used the credit and that the credit should be reviewed as part of a process to evaluate all business tax credits.
“We had started down the road of doing a review of all of the tax credits to see how effective they are,” he said. “That didn’t happen but it should.”
Knight said in addition to the tax credits covered by this report to lawmakers, a report in January will list all of the state’s tax expenditures. Those are items that are currently exempt from state taxes, including sales taxes and income taxes.
“We spend more in tax expenditures every year than we spend in the entire state budget,” said Rep. Seth Berry, D-Bowdoinham, the lead Democrat on the committee. He said more time should be spent reviewing whether all of those tax breaks are warranted.
“We have discussed, in a bipartisan way, looking at all tax breaks to make sure they are resulting in new jobs or keeping jobs,” Knight said.
An example of keeping jobs is the Shipbuilding Tax Credit, which is available to any ship builder that employs at least 3,500 workers, with health insurance and retirement benefits for the workers. Bath Iron Works is the only facility that qualifies for the credit.
The report indicates in 2011 the facility had 5,173 workers and has invested $333 million in the facility since the break first took effect in 1997. The tax break could be for as much as $3.5 million a year.
Berry said some of the credits in the current report may meet the goal of creating or saving jobs, but no one can be certain on most of them.
“Maine has no idea how its corporate tax breaks are being used, who they are going to, are they creating jobs,” he said. “And what benefits do other taxpayers get who are shouldering the burden?”
Berry said whenever a tax break is granted of any nature; it means that other taxpayers will have to pay a little more in taxes.
Both Knight and Berry said the largest of the tax breaks in the revenue service report is for the BETR program. The program reimburses some businesses for property taxes paid on qualified property.
“There is no jobs measure for that substantial expenditure,” Knight said. “I know there are concerns about trade secrets and confidential business information, but there must be some way we can get a measure of what this means for jobs in Maine.”
The report lists every business that filed for the program during the budget year ending June 30, 2012. Approximately 1,800 companies were reimbursed over $52.7 million.
“We may be subsidizing large, out-of-state corporations at the expense of Maine’s middle class, and we don’t know if that is creating any jobs,” Berry said.
Six of the top 10 BETR recipients have their corporate headquarters located outside of Maine.
Both Knight and Berry say if they are re-elected, they will work to make sure business tax breaks are reviewed by lawmakers to see if they are still warranted.