Pine Tree Growth

The Maine Chamber of Commerce recently printed a handy map of the governor’s new Pine Tree Zones, with the surprising result of highlighting the fact that Maine barely has a place, outside Portland and environs, that is not a Pine Tree Zone. One hundred and three towns and cities have these zones – Madawaska to Wells – with Maine committed to lowering taxes for the right kinds of new businesses.

A Pine Tree Zone gives businesses in financial services, manufacturing or many different types of technology long-term breaks on sales and income taxes and perhaps energy-cost breaks if they meet certain income and benefit requirements. The zones could help towns strengthen their economy or they could turn out to be one more seemingly good idea that really made no difference at all. It is in Maine’s interest to figure out which as soon as possible. That means that along with the good news about the high level of enthusiasm for these zones, the state should invest considerably in measuring their effects.

This seems like a natural idea, but the long disagreement over dropping the tax on business equipment shows that it is not. Maine’s rebate program for this tax costs tens of millions of dollars a year and returns … well, it returns scores of anecdotes about how businesses would not have invested but for the Business Equipment Tax Rebate. The stories may be entirely accurate and demonstrate a serious benefit, but anecdote piled on anecdote sometimes adds up to something substantial and sometimes adds up to not much at all. (During the apex of the BETR debate, hard-nosed businessmen, who would never run their companies by anecdote, traveled the state to promote the tax break and grew misty-eyed at the stories of all the people being helped by it. They were very effective.) The anecdotes may have illuminated an actual benefit to Maine, but no one knew because there was a lack of data behind them.

And there is reason to doubt. In his book “Rethinking Growth Strategies, ” economist and public-policy expert Robert G. Lynch examines the effect of local and state taxes on development and, among other things, concludes, “there is little evidence that state and local tax cuts – when paid for by reducing public services – stimulate economic activity or create jobs.” That is a crucial point: Tax money foregone results in spending cuts to programs that may be more effective at securing good employment – college scholarships, for instance. Maine must make sure it is using its tax dollars most effectively, no matter what conventional wisdom says.

The point is not to judge Pine Tree Zones one way or another now, but to make certain their effectiveness can be measured a year or two from now. Doing so could save everyone a lot of trouble.