Once is enough

To local chambers of commerce, it’s dual utilization. To Maine’s public-interest groups, it’s double dipping. Whatever one wants to call it, there is something wrong with the current practice of businesses getting a tax break from their town and then a tax break from the state on taxes they didn’t pay their town.

It works like this: A business enters into a Tax Increment Financing (TIF) agreement with its host municipality in which a portion of the property taxes paid — including the tax on machinery and other equipment — are reimbursed to the business, often to help finance an expansion or modernization. Then the business gets a rebate from the state, through the Businesses Equipment Tax Reimbursement (BETR) program, for its entire local property tax on machinery and equipment, even for the tax it didn’t pay.

According to the Maine State Chamber of Commerce, this dual utilization is an important part of the “powerful economic development partnerships” that have been forged between business and government and have brought jobs and prosperity to the state. According to the Maine Citizen Leadership Fund, this double dipping will amount to $13 million this year, $16 million next year and more than $20 million a year by 2008.

TIFs have been used for many years and have proven themselves a useful municipal tool in economic development. The rebate of property taxes has helped many business expand or relocate, often with extensions of water and sewer lines and road improvements that have created conditions for other businesses to expand or relocate. BETR, created in 1995, has helped make Maine more competitive in the businesses attraction game with other states, especially those states which do not tax business equipment in the first place, and it’s rapid growth to a nearly $50-million program is proof that Maine people are willing to assist business growth. The combination of TIF and BETR, though, has created a situation, perhaps by accident, that is unfair and unhealthy.

Unfair because the BETR law foresaw the potential for some double dipping/dual utilization and prohibited some, but not all, of it. For example, equipment eligible for a special state tax exemptions, such as the one for pollution-control devices, is not credited toward the company’s BETR eligibility. TIF agreements are made at the municipal level and not subject to the ban. Most TIFs are with large companies. Small businesses without the clout to get a TIF are left out.

Unhealthy because every tax dollar not paid by one taxpayer is shifted to another. In this case, from large businesses to small businesses and residential property owners. Even if this is unintentional and caused by positive investments in Maine business and industry, it should concern lawmakers. The Legislature can correct this inequity this session with a simple adjustment to BETR.