TAX CHARITY BEGINS AT HOME

Mainers have long had a love-hate relationship with out-of-state homeowners who are gobbling up prime properties along the coast and inland lakes. Maine residents hate it when these newcomers try to tell how to improve things. But Mainers also love to find ways to get the out-of-staters to foot a bigger share of the state tax bill. Many bills have been introduced in the state Legislature to assess higher taxes on out-of-staters. One popular approach, not yet adopted by the Legislature, is to charge higher property taxes on vacation homes.

So it is odd that many Mainers are ready to pass a tax cap referendum that will give a big tax break to wealthy out-of-state vacation homeowners while netting only a small break for them. According to a recent analysis of the tax cap done by the Margaret Chase Smith Center for Public Policy at the University of Maine, municipalities would lose nearly $51 million in property taxes from vacation homes if the measure passes.

If the state increases income or sales taxes to help balance municipal budgets, the property tax cap could lead to a reduction in the property taxes paid by out-of-state residents that is offset by higher taxes paid by individuals who pay other state taxes, the study concluded. In other words, Maine residents could pay more in income and sales taxes to give a tax break to out-of-staters.

Maine has the highest concentration of vacation homes, according to the U.S. Census Bureau. Of the state’s 651,901 housing units, 15.6 percent were devoted to seasonal use, according to the 2000 census. It is not known how many seasonal homes are owned by Maine residents and how many are owned by out-of-staters. However, a survey done by the Maine State Planning Office three years ago determined that one-third of such homes were owned by out-of-staters. The Maine Bureau of Taxation has estimated that out-of-staters pay 20 percent of all residential property taxes here.

According to the UMaine study of the tax cap, Maine towns collected nearly $160 million in property taxes from vacation homeowners in 2003. This is nearly 15 percent of the $1.08 billion collected in taxes on residential real estate.

Many vacation homes are much more valuable than year-round residences.

In towns with high mill rates, those who own expensive properties would get a big break under the tax cap while those owning an average house would get a much smaller break. However, many towns with a lot of vacation homes have very low mill rates or do not assess taxes on the full value of properties.

Because the total value of property in these towns is so high, the town can afford to assess lower taxes. In some instances, taxes would actually increase if the tax cap passes. In Carrabassett Valley, home to Sugarloaf ski area, residential real estate was taxed at 60 percent of its value in 2003. The tax on a $150,000 house there was $898. Taxes on a home of the same value in Bangor were $3,117 last year.

For some Maine residents, property taxes are overly burdensome. Expanding the circuit breaker program, which lawmakers failed to do this year, to provide targeted relief to such people makes sense. Giving a big tax break to those who don’t need it doesn’t.