Business tax on equipment

The article, “Business tax targeted for repeal” (BDN, Dec. 26), provides some useful and timely information about the proposal to phase out the taxation of business equipment in the state of Maine. The article quotes several individuals who are in favor of this proposal, including Gov. Baldacci, Dana Connors, David Clough and Sen. Lynn Bromley. Although it references “municipalities with a large industry are particularly worried because they get a significant part of their property taxes from the equipment and machinery part of the tax,” it offered no points of view from individuals concerned with such a change in policy.

Most importantly, the article begins with the simple declarative sentence, “Most states do not tax personal property used in a business.” To the best of my knowledge, this simply is not true.

There are several business service companies that provide personal property tax compliance services for businesses. It seemed reasonable to me that these service businesses were national in scope and did not exist to service just the needs of their clients in Maine and a few other states. The Web site of Marvin F. Poer and Co. indicates the company files returns in all 39 states and the District of Columbia that tax personal property.

Maine is among the vast majority of states that tax business equipment. Every year in Maine larger tax assessment jurisdictions routinely receive many declarations of business equipment holdings, many of them unsolicited, from companies, or service businesses acting on their behalf, seeking to comply with the commonplace requirement in most states to file a business personal property tax return and pay a business personal property tax.

One analysis that has been circulated related to the proposed phase out of the business equipment tax estimates that $10.3 billion of business personal property was taxed in 2005, that $4 billion of it would have been tax exempt if the proposal to phase out personal property taxation had been in effect in 1996 instead of BETR, and that the state would under this plan reimburse municipalities for the lost property taxes on $2 billion of this $4 billion loss.

Based upon average tax rate of approximately 0.017 this would indicate an unreimbursed tax loss to municipalities of $34 million. Obviously, municipalities with a large component of their tax base in business equipment are concerned about how they could cope with their share of this tax loss without simply shifting the tax to the other

taxpayers in the community.

However, the impact is not limited just to municipalities with a large business equipment component because over time as the relative value of these communities decline, due to the new exemption, tax shifts will occur in other municipalities. For example, as the county taxes in a community losing value relative to other communities declines, these taxes will be paid by other municipalities in a county.

Similarly, as more state education subsidy goes to municipalities losing relative value due to new tax exemption, there is less state subsidy to distribute to other communities.

William Van Tuinen lives in Madison.