Strong communities are the backbone of a good quality of life. Local services like parks, libraries, fire departments, safe roads, and clean water are integral to creating high-quality places where Maine families can plant deep roots and thrive.
In Maine, towns and cities cannot levy their own income or sales taxes. So, an important way we pay for those important services is through Municipal Revenue Sharing, a law that requires the state to disburse 5 percent of state sales and income tax revenues back to Maine’s towns and cities.
Revenue sharing worked well for three and a half decades. But in 2009, the Legislature slashed revenue sharing. Funding was cut again and again in subsequent years, leaving communities to raise regressive property taxes, cut local services, or both. In the last 10 years, lawmakers have cut $700 million from the revenue sharing program.
This year, cuts to Municipal Revenue Sharing were scheduled to expire. But in Governor Janet Mills’ budget proposal would extend the cuts for another two years. Her plan would provide 3.75 percent of revenues to towns and cities, rather than the statutory 5 percent, shortchanging Maine’s communities by $90 million over the two-year budget period.
Now, Maine’s legislators have the opportunity to improve the governor’s budget proposal. To protect jobs, reduce pressure on property taxes, and increase investments in strong communities, Restoring Municipal Revenue Sharing should be a high priority.
Cuts to communities are tied to tax cuts for the wealthiest
In 2011, 2015, and 2017, income tax breaks that disproportionately benefitted the highest income households cut into state revenues and Municipal Revenue Sharing, along with education funding, paid the price of those tax cuts.
Maine’s income tax code is raising $430 million less per year compared to 2010 income tax rules. Additionally, in 2017, legislators repealed a voter-approved tax increase on the top 2 percent of households that would have raised $160 million per year in income tax revenues approved by Maine voters.i
While Governor Mills’ budget plan does not propose any new income tax cuts, it embraces the existing problems in our tax code and, as a result, is unable to fund our most basic commitments to schools and communities.
Reduce revenue sharing threatens local jobs
Municipal Revenue Sharing supports jobs in our local communities, and every cent that our towns and cities are denied because of inadequate tax policy increases the risk that teachers, first responders, and other middle-class workers will lose their jobs.
This dynamic is not theoretical: Local governments saw a drop in revenues over the summer as a result of the pandemic, and by December of 2020, local governments employed 4,400 fewer people than in December of 2019. In an already weakened labor force, it is essential that the Legislature invest in protecting jobs.
New revenue will support strong communities
Without a plan to raise revenue our communities will continue to lag, cash-strapped, for the foreseeable future.
Policymakers should reject the proposed cuts to Municipal Revenue Sharing and seek fair and sustainable revenue to restore state funding to communities. By closing loopholes and modernizing our tax code, we can secure the funds necessary to support strong communities throughout our state.
[1] Both figures provided to MECEP by the Institute on Taxation and Economic Policy, December 2018
