Revenue sharing is an important ingredient in a comprehensive approach to property taxes. Homestead exemption helps export property taxes to second home owners, the old circuit breaker program and now the property tax fairness credit help families with housing costs that are a high percent of their income, and revenue sharing helps lower state wide property taxes because we’ve recognized that our communities stretch beyond the towns we live in.
Good afternoon Senator Dow, Representative Tipping, and distinguished members of the Joint Standing Committee on Taxation. My name’s Sarah Austin, a policy analyst at the Maine Center for Economic Policy. I’m here to testify in favor of LD 133 and LD 492 and against LD 875 and LD 887.
Property taxes have risen significantly over the last several years even as municipal leaders have cut and thinned out local budgets. State cuts to revenue sharing, elimination of the old circuit breaker program, and other state policies like failure to fully fund education have all taken their toll on municipalities’ abilities to keep property taxes affordable. Low- and middle-income Mainers are the least able to afford large hikes in property taxes and the impacts are felt greatest in communities with low property valuations and low incomes. The rate at which property taxes are increasing is certainly a pressing concern, but the pressure on property taxes is an outcome, not a cause, of a serious problem with our state’s tax policy.
Tax policies significantly cutting state revenue mostly by giving very expensive income tax breaks to the wealthiest in this state have forced the hand of municipal leaders. When the state gives tax breaks to the wealthy instead of funding schools, municipal leaders have to bridge the gap. When the state gives tax breaks to the wealthy instead of funding revenue sharing at the intended 5 percent, municipal leaders have to bridge the gap. Kids still need a good education, roads need cleared, and public safety officials need to be equipped to serve their communities.
Revenue sharing is an important ingredient in a comprehensive approach to property taxes. Homestead exemption helps export property taxes to second home owners, the old circuit breaker program and now the property tax fairness credit help families with housing costs that are a high percent of their income, and revenue sharing helps lower state wide property taxes because we’ve recognized that our communities stretch beyond the towns we live in.
I live and work in Augusta, but have friends, loved ones, and favorite places all over this state. I drive to Portland once a month to be with friends, enjoy restaurants, and see entertainment. In the summer I go to Rockland and Belfast to see the ships and the ocean and enjoy the local shops and ice cream. I go to camps in Hope, Gray, Clifton, and Unity. When I’m in these places that bring me joy, I also have the peace of mind to know that if I needed a police officer, an ambulance, or the roads back home cleared after a snow storm, these conveniences are available to me even though I am a resident of Augusta.
Revenue sharing acknowledges the interconnectedness of our communities and that we have a shared interest in funding the services that we as a state rely on. The formula also recognizes that some communities are services centers and provide important services and infrastructure used by members of surrounding communities, and other communities have fewer resources to provide the important pillars of a thriving community, like education, public health and safety, and administrative services.
There is a great deal of inequality in the resources municipal leaders have to draw on when the state fails to pay its share in revenue sharing. Houlton for example has approximately $49,000 in valuation per person vs York’s $314,000.[i] York has a per capita property tax base that is 6 times larger than Houlton and can therefore better weather state cuts to local resources, maintain services, and keep property tax rates low enough that low and middle income residents aren’t adversely affected. Houlton, on the other hand, has to increase its mill rate much higher for every dollar it loses from state funding sources.[ii]
I urge the committee to support LDs 133 and 492, which support communities and the services they provide to all residents and visitors. These bills gradually bring the state back to a 5 percent commitment to state revenue sharing and will help bolster the important work our local governments do to make Maine a great place to live and work.
I urge the committee to reject LDs 875 and 887. LD 875 creates a perverse incentive for poor towns to provide fewer services and would give the wealthiest towns in the state more resources simply because their large valuations make their mill rates less sensitive. LD 887 misses the point of revenue sharing entirely by failing to directly support the services communities provide for those who reside beyond their municipal boundaries.
[i] Houlton’s 2017 valuation is $290,350,000 and York’s is $4,039,100,000 http://www.maine.gov/revenue/propertytax/sidebar/2017_state_valuation.pdf; Houlton’s population is 5,882 and York’s is 12,862, U.S. Census 2010-2014 5-year U.S. Census estimates
[ii] Median household income in Houlton is $32,000 vs the $79,000 in York. In 2015, Houlton’s mill rate was twice that of York. Income estimates are from U.S. Census 2010-2014 5-yr Census estimates, 2015 mill rates available at: https://www1.maine.gov/revenue/propertytax/municipalservices/fullvaluerates.pdf
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