In the Legislature, we take taxes seriously. We know Mainers are trusting us to make smart decisions, and to use their tax dollars to fund things they care about, such as education, road repair and health care. We also know Mainers expect us to ensure our tax system is fair. To do that, we must make sure everybody contributes in proportion to their ability, and that taxes do not put an unnecessary burden on working-class Mainers striving to get ahead or on seniors struggling to remain in their homes.
As House chairs of the Legislature’s Taxation and Appropriations and Financial Affairs committees, we were pleased this year to make important progress toward creating a more fair tax system by focusing on reducing property taxes and sending more money back to communities.
Gov. Janet Mills’ proposed budget provided a solid framework for us to start our work and made huge steps toward honoring Maine’s statutory commitments to fund local schools and share state revenue with local communities. Under the newly enacted budget, the state will contribute an additional $111 million over the next two years toward the cost of K-12 education, offsetting the cost that needs to be raised from local property taxes. We aren’t at 55 percent yet, but through the past two budget cycles, the state has now earmarked $276 million more for the cost of schools.
Under state law, Maine is required to return 5 percent of the revenue it collects to local communities. The previous administration targeted this revenue sharing for cuts, trying in 2015 to eliminate it entirely. This year, former and current mayors and town councilors such as Rep. Thom Harnett, D-Gardiner, Rep. Michael Brennan, D-Portland, Rep. Kristen Cloutier, D-Lewiston, and Rep. Christopher Caiazzo, D-Scarborough, and House Speaker Sara Gideon, D-Freeport, championed the effort to fully restore revenue sharing, stressing that local leaders want to reduce property taxes but need the state to do its part to make that possible. Working with Mills and our Republican and independent colleagues, we increased revenue sharing by 50 percent this year and even more next year. We still aren’t back at 5 percent, but we are committed to getting there. Over the next two years, local taxpayers will see an additional $99 million returned to their communities to offset the local cost of municipal services such as road repair, plowing and public safety.
But there’s more. The budget included a bill from Rep. Betty Austin, D-Skowhegan, to increase the Homestead Exemption by 25 percent, raising it from $20,000 to $25,000. This will provide $20 million in direct property tax relief to Maine homeowners by directly reducing the valuation of their homes for municipal tax purposes. We also passed legislation proposed by Gideon, which will refund an additional $30 million directly to more than 300,000 Maine families eligible for the Homestead Exemption. The budget also incorporated a bill from Rep. Rachel Talbot Ross, D-Portland, to improve the Property Tax Fairness Credit. This program provides a tax credit for homeowners and renters who pay a high percentage of their income on housing costs. The new budget will make an additional 13,000 Mainers eligible for this program and provide a total of $10 million in property tax relief.
In addition to property tax relief, this session Maine expanded the Earned Income Tax Credit, a credit given to working families who just can’t pay the bills. Sen. Eloise Vitelli, D-Sagadahoc, and Rep. Mo Terry, D-Gorham, championed these ideas and we were able to garner broad support to increase access to this credit by $16 million per year, covering an additional 100,000 Mainers. We funded this by closing a loophole that gave out-of-state businesses a bigger tax cut than local companies.
When you add it all up, over the next two years alone Maine will provide $286 million in additional tax relief and direct funding to towns and local school districts to offset the cost to local taxpayers. Starting with a strong initial budget proposal from Mills, we were able to focus on creative ways to make our budget and tax system work for even more people. The Taxation and Appropriations committees were proud to work together this session to provide a better life for Mainers.
Rep. Drew Gattine, D-Westbrook, is the House chair of the Appropriations and Financial Affairs Committee. Rep. Ryan Tipping, D-Bangor, is the House chair for the Taxation Committee. Both are serving their fourth term in the Legislature.