More Taxes to Cut

By failing to support a constitutional tax break for homestead land, the Maine Senate this week gave itself time to consider the cut for homeowners in the larger context of other breaks planned for this session. The amendment should return later as part of this larger package of these breaks.

Senate Minority Leader Paul Davis said Republicans did not fully support the measure, LD 2, because the governor’s tax relief bill, LD 1, already had a Homestead provision in it but lacked meaningful spending caps. That means, he said, it could shift taxes from primary homes to businesses, a problem that would be exacerbated under LD 2. The Democratic chairman of the Taxation Committee, Sen. Joe Perry, agrees there is the potential for a tax shift because not all property owners would receive the benefit of the tax break.

The bill would send this question to the public: “Do you favor amending the Constitution of Maine to allow municipalities to limit the rate of change in the taxable value of homestead land to the rate of change in purchasing power of United States currency as consistently measured by a reliable index adopted by the Legislature?”

Sen. Perry, however, notes that the popular impulse to do away with the business equipment tax, which will be debated later this year, also represents a tax shift. It is a tax Republicans would like to eliminate. One solution, then, is to pair the homestead land tax break with the business equipment tax elimination. The Legislature’s accountants can figure out who wins among all the tax shifting; lawmakers would achieve the twin goals of lowering property taxes on homes, which has gotten so much attention in the last couple of years, and on business equipment, which they have been talking about doing for a decade.

There are still more tax breaks jogging through committee, including two that would help service centers: local option Homestead and Circuit Breaker programs that could be tailored to help specific communities with specific tax problems. And there is a working waterfront tax break that would certainly pass if brought up for a full vote. Together, these bills represent a further opportunity for legislative negotiation to lower Maine’s overall tax burden while more fairly distributing the remaining taxes.

LD 2 had passed easily in the House, on a 121-21 vote. By slowing it down, Senate Republicans deal themselves into the process and help Maine better understand the range of tax cuts and shifts being considered.