Maine needs new economic investment to attain a more prosperous future. That’s one of the primary goals of the tax reform package that has been debated for the past two months before our committee.

At the head of the list is repeal of the personal property tax on business equipment. Our focus on this issue has broad support. When the governor of Maine, the Speaker of the House and the Maine Chamber of Commerce agree about tax policy, chances are you have a pretty good idea.

Maine, like many other Northeastern states, has seen a severe decline in the number of its manufacturing jobs, particularly in the forest products industry. Of the jobs in the mills and the woods that we had just 15 years ago, one-third no longer exist, and the outlook isn’t bright.

And these weren’t just any jobs. They were some of the highest-paid hourly positions anywhere in the state, and the mainstay of rural communities in counties that are now suffering from very high unemployment.

The property tax on business equipment isn’t the main reason behind this decline, but it is an obstacle to convincing current employers – and new companies – to invest in Maine.

Maine needs an edge to be competitive in attracting manufacturing jobs, and repeal of the personal property tax can help provide this edge. When New York, Pennsylvania and Midwestern states began losing their manufacturing base in the 1970s, they abolished taxes on business machinery and helped solidify their economies. The decline of Maine industries began later, and we were slow to respond.

The BETR program launched by the King administration has helped. This Business Equipment Tax Reimbursement pays business for the personal property tax they send to towns and cities, and has encouraged major expansions at National Semiconductor, Fairchild Semiconductor and Bath Iron Works, among others.

But there are problems with BETR, too. Reimbursements were delayed last year due to state budget shortfalls, and businesses have questioned the state’s commitment, creating uncertainty about our intentions. The annual cost of BETR to state taxpayers – $62 million and rising – puts it into competition with other important state programs. At a time of massive budget cuts, it’s hard to keep BETR whole, although so far we have.

So repealing the personal property tax is a much better long-term solution. There will be no question about the state’s intentions, and we will be in position to aggressively recruit new businesses. Thirty-eight states still impose a business equipment tax, including three in New England, so we will definitely stand out.

Yet there are issues with repeal, too. Towns and cities are concerned about the loss of property tax base. And the state still faces the task of paying for BETR, plus the possibility of future reimbursements to towns. The state constitution requires payment of 50 percent for any loss of property tax base.

Mainers understand that raising taxes on one hand to provide reimbursements for another tax makes no sense. Rather than continue these complicated reimbursements, let’s make it simple. Don’t tax personal property that creates jobs.

Our plan, part of a competing measure to the Maine Municipal Association referendum, provides a clearer and more decisive way to eliminate the tax. We propose a permanent exemption for future BETR-qualified equipment, put into service after April 1, 2004, through a constitutional amendment. This will relieve the state of the need to replace the BETR program with a new municipal reimbursement program.

All pre-BETR equipment would remain taxable. This amounts to at least $110 million of the $173 million now collected by municipalities in personal property taxes. And BETR itself would remain in effect, though no new property would be added to it.

The obvious question is, what about the towns and cities? How will they cope with the loss of future tax base?

We can make them whole through another provision of our tax reform plan. No community would be required to spend no more than 10 mils – $10 per thousand on the property tax – on school costs required by the state’s new Essential Programs and Services model. The state would pick up any additional school expenses up to the limit of what the state requires under EPS, which is based on the Learning Results curriculum standards.

If any town lost part of its property base – either through the personal property tax repeal or, more catastrophically, losing a major employer – it would be made whole through this new school funding formula, dollar for dollar. Any state savings under this reform plan would be redirected to help fund the new 10 mil/EPS formula, which will require an additional investment by the state.

This plan isn’t perfect – no plan is – but we believe it provides the best chance for a fairer distribution of the tax burden, and a spur to the economic growth that provides the best long-term means to reducing that tax burden. If we can provide new and better-paying jobs, the tax burden goes down just as surely as if we cut more programs and services.

We’ve picked a difficult year to do tax reform, but these difficulties have also concentrated everyone’s attention. Repealing the personal property tax, but protecting communities through a new school formula, can be a big part of the solution.

Rep. David Lemoine, D-Old Orchard Beach, and Sen. Stephen Stanley, D-Penobscot, are co-chairs of the Legislature’s Taxation Committee.