BETR than what

If the sole purpose of the 1995 Business Equipment Tax Reimbursement law was to cut the cost of doing business in Maine, BETR is the best.

Since the advent of BETR, more than 1,200 companies have been repaid by he state for the personal property taxes they pay to their towns — from a fund that started at $7 million, demand grew to $33 million this year. It will be a projected $41 million next year, $44 million the year after that. There seems no limit to the appeal of free money.

But to those who assumed that at least part of the BETR intentions was to aid start-ups and expansions, to direct economic development to struggling regions, to encourage good jobs with good wages and benefits, the tax break is a disappointment. Or at least a mystery — no one knows the extent to which BETR does those things because Maine has no way of keeping track.

That a law passed in jubilation just four years ago could now be under fire says a lot, none of it good, about the meandering way Maine develops tax policy. This split over whether Maine created a more salubrious business climate or a monster is why the Taxation Committee will hold hearings Wednesday on eight bills aimed at scrapping or scaling back BETR.

One, to prohibit BETR payments for equipment already covered under a tax increment financing arrangement, is absolutely necessary. Double-dipping is wrong. Another, to reduce the amount of reimbursement from 100 percent of taxes paid to 90 and the length of a particular piece of equipment’s eligibility from 12 years to 10, may be needed to control costs. It’s also more in line with similar programs in other states.

But most of the other bills are mere tinkering. Proposals such as adding to the list of specific types of business equipment not eligible and excluding food, lodging and retail businesses from the program are driven by a desire to restrain BETR, but steered by no guiding tax policy. It is particularly telling that none of the bills address the truly troubling issues surrounding all business-assistance programs — job creation, job quality, the question of whether companies receive BETR payments as they lay off workers, BETR’s inability to direct economic development where it is most needed. You can’t tinker your way around the basics.

What’s shaping up as a contentious debate would be helped considerably if the two sides would agree to some ground rules. Maine is not, as BETR’s staunchest supporters claim, one of only a few states that taxes business equipment — it is one of 39. And BETR is not, as detractors say, the only such program not tied to performance measures in economic development. Thirty states have programs like BETR. Not all reimburse so much for so long, but none effectively ensure that benefits extend beyond the business’s bottom line.

Here’s the conclusion of a recent study by the National Conference of State Legislatures: “Individual states spend tens of millions to hundreds of millions of dollars annually on economic development programs. Few states know the exact amount they spend to support economic development initiatives. No state knows how effectively the money is spent.”

But some states are starting to find out. There is a growing trend among states to enact no change in tax policy without first setting specific performance expectations and without first fully understanding its impact upon all segments of society.

It starts with evaluating the effect all taxes collected in a state — sales, income, property, excise and others — have upon people of various income levels and businesses of various sizes and types. From there, a state has at least a fighting chance at figuring out the extent to which a tax break for some means a tax burden for others.

Minnesota is a leader in this movement. It updates its tax incidence study every two years, giving lawmakers up-to-date information before they act. And that pays off. In the last two years, several major pieces of tax legislation that looked good on the surface were significantly altered after the numbers proved they would not deliver on their promises.

Texas goes one step further. Not only does it produce a biannual tax-impact report, it requires every piece of tax legislation to include an impact statement and a means of measuring results. Texas lawmakers don’t act on hunches, its taxpayers don’t get surprises.

To its credit, Maine does have a goal regarding taxation — a lower tax burden in general, one that is in line with the rest of New England in particular. But the controversy over BETR, along with the endless controversies over the sales tax, the gas tax, the property tax and the income tax, shows how hard it is to reach a destination without a road map.