Each year the state of Maine gives away millions of public dollars in subsidies to businesses in the form of tax breaks. Often these tax breaks are not proven to deliver on the outcomes they promise, and in some cases are proven to be ineffective. Yet every legislative session there are a slew of proposals to give away even more public money to businesses.1
Businesses received a huge new subsidy from the state of Maine last session in the form of the Dirigo Business Incentive program championed by Governor Mills. The subsidy is estimated to cost over $50 million per year beginning in 2024 — a steep price tag at a time when the state is facing a housing crisis, rising food and energy costs, and a slew of other unmet needs that would support Mainers to lead healthy and productive lives.
Despite this huge giveaway of public tax dollars to businesses in the 2023-2024 biennial budget, there are even more proposed subsidies in the coming legislative session up for debate. In the coming months, Maine Center for Economic Policy will publish a series of blog posts further examining the legislative proposals below, all of which would give away public money to businesses.
The bills listed here are up for consideration during the second session of the 131st Maine Legislature, which runs from January to April of 2024. Many of them have been reviewed by the Legislature’s Office of Program Evaluation and Government Accountability (OPEGA). Unfortunately, the bills seek to expand these programs without addressing the concerns and recommendations in the OPEGA reports.
The public hearing for LD 10752 was postponed and carried over by the Taxation Committee from last session after the Office of Program Evaluation and Government Accountability (OPEGA) released a damning report about the ineffectiveness of the program and its administration.3 The proposed bill would expand subsidies and make other changes including making credits refundable and transferable, which would allow companies who pay no Maine taxes to benefit. This subsidy is inherently unfair because it provides funding to production studios after the production is made for activities they may have conducted anyway, instead of focusing on those that would not otherwise have the funding to carry out a production. MECEP’s recent blog post delves further into the pitfalls of this program.4
LD 6435 was carried over by the Taxation Committee after a public hearing was held last session. The proposal would essentially double the existing R&D credit and lower the threshold required for investment to receive the credit. MECEP testified in opposition to the bill,6 citing the findings of state and federal research showing the R&D tax credit is ineffective at accomplishing its goals and investments in other areas, including broadband infrastructure, availability of researchers and collaborative research settings at universities, and human capital in sciences with adequate skills and training are more important to create an environment to support R&D. Due to a lack of data collected on Maine’s R&D credit, OPEGA was unable to assess its effectiveness in a review of the program.7
This bill was carried over by the Taxation Committee from last session. It would revive the now defunct New Markets Capital Investment Program by authorizing another $30 million of investments. The New Markets program was first scrutinized when the state was left on the hook for paying $16 million to Great Northern Paper, which shut down just 14 months after the investments from the program. OPEGA reviewed the New Markets program in 2017, finding it may not be cost effective for the ends it seeks to accomplish, and data was needed to measure effectiveness of the program.8 OPEGA also found the credit may be duplicative because some recipients participated in other programs. The recommendations from OPEGA’s report are unaddressed in this proposal to revive it. Recently, Nine Dragons Paper shuttered the Old Town Paper Mill just a few years after receiving $12 million in tax credits under the New Markets Capital Investment program.9 The uncertainty around this program makes it a questionable investment of Maine taxpayer dollars.
MECEP recognizes the need for comprehensive reforms to our child care system and applauds the advocates and lawmakers trying to address this complex issue. However, these two bills carried forward from last session are not the best approach and are unlikely to have any measurable impact. Both bills would provide credits to employers — rather than those directly impacted, including employees or child care workers — for providing a child care benefit to their employees. This is a benefit that some businesses already offer. Businesses that already have child care reimbursements are able to attract employees in part because they offer good benefits. Providing a tax credit for something businesses already do is not a good approach.
Instead, Maine should focus on increasing the availability of child care slots by expanding reimbursements to child care providers that allow them to keep their doors open and provide care so parents and guardians can go to work. Sen. Troy Jackson has a bill in this session, LR 2825, “An Act to Ensure Sustainable Reimbursement for Child Care Providers and to Support the Expansion of Child Care Services” that would reimburse child care providers based on enrollment rather than attendance. This is a much better means of addressing the child care shortage than giving subsidies to employers for a benefit they may already be providing. Overall, Maine still has much to do to make child care affordable to all people who need it, which will require building on the foundation laid by Sen. Jackson’s bill from last session. Investing in higher wages and benefits for child care workers and making more households eligible for subsidies so they can afford child care if they need it will help increase child care availability.
Dirigo Tax Subsidy
Last session, the Legislature passed a huge new tax subsidy for businesses, the Dirigo tax subsidy. No bills have been put forward this session pertaining to this program. MECEP previously pointed out issues with the program that could substantially impact the cost while providing little benefit to Mainers.10 As a key proposal from the Governor it was rubber stamped by the Legislature with little scrutiny. Businesses with no Maine tax liability are allowed to receive tax refunds of up to $500,000 each year, with the ability to carry over up to $2 million in credits to use in future years. There is also no limit on the total cost of the program, and no sunset date. These oversights increase the likelihood Maine will give away money to businesses that are already capable of making the investments this subsidy purports to encourage
Other bills to watch:
- LD 1804, An Act to Provide Transparency and Accountability for Corporate Tax Expenditures sponsored by Sen. Rick Bennett. Carried over from last session. MECEP testified in favor, supporting increased transparency and reporting for certain business tax subsidies.11
- LD 1810, An Act to Expand the Maine Historic Rehabilitation Credit and Establish a Weatherization Tax Credit sponsored by Rep. Mo Terry. Carried over from last session. MECEP testified in favor, citing the past success of the program at increasing affordable housing stock.12 MECEP believes it is still worth exploring whether this is the best use of these funds, or whether other policy alternatives, like rental assistance, would have greater benefits to Mainers. While there is solid evidence that direct supports help Mainers with low income, the evidence on tax subsidies to businesses is mixed.
- LD 1961, An Act to Support Potato Processing in Maine sponsored by Sen. Troy Jackson. Carried over from last session; concept draft that doesn’t yet have language. Referred to the Taxation Committee, so it is likely to include tax subsidies for the potato processing industry.
- LR 2856, An Act to Provide Investment Incentives to Keep the Portland Sea Dogs in the State, sponsored by Sen. Troy Jackson. Second session bill, the contents of which have not yet been released. Likely to give away taxpayer dollars to subsidize the private equity firm that purchased the Portland Sea Dogs in 2022.13
Notes:
[1] Pillsbury, Maura. Policy Brief: Are Tax Giveaways Worth the Money? Maine Center for Economic Policy, 1 May 2023.
[2] https://legislature.maine.gov/billtracker/#Paper/1075?legislature=131
[3] Pillsbury, Maura. “Hollywood strike highlights unfairness of film tax subsidies.” Maine Center for Economic Policy, 3 Oct 2023.
[4] Ibid.
[5] https://legislature.maine.gov/billtracker/#Paper/643?legislature=131
[6] Pillsbury, Maura. “Testimony in Opposition to LD 643, An Act to Promote Research and Development in the State by increasing the Research Expense Tax Credit.” Maine Center for Economic Policy, 28 March 2023.
[7] Office of Program Evaluation and Government Accountability. Evaluation of the Research Expense Tax Credit (R&D tax credit). March 2022.
[8] Office of Program Evaluation and Government Accountability. New Markets Capital Investment Program – Current Portfolio of Projects Produced Positive Outcomes; Cost-Effectiveness Could be Improved. March 2017.
[9] Anderson, J. Craig. “Chinese company to receive $12 million in tax credits to restart Old Town mill.” 14 Dec 2018. Portland Press Herald.
Royzman, Valerie. “Old Town mill shutting down for extended period.” 28 March 2023. Bangor Daily News.
[10] Pillsbury, Maura. “Proposed Dirigo business subsidy is a bad deal for Maine and could worsen inequality.” 31 May 2023. Maine Center for Economic Policy.
“10 unanswered questions about the proposed Dirigo business subsidy” 17 May 2023.
[11] Pillsbury, Maura
[12] Phillips, Josie.
[13] Jordan, Glenn and Travis Lazarczyk. “Portland Sea Dogs sold to group that has gone on minor league baseball buying spree.” 6 Dec 2022. Portland Press Herald.
