AUGUSTA – Businesses and municipalities squared off Thursday over a bill designed to eliminate the property taxes assessed on new business equipment.

The Legislature’s Taxation Committee spent its entire afternoon listening to proponents and critics of LD 2056, a bill that would provide a property tax exemption for business equipment purchased on or after April 1, 2008, that formerly would have been covered under the Business Equipment Tax Reimbursement program.

Currently under the BETR program, companies are reimbursed for the local taxes they pay on new equipment.

While the proposed bill would prevent communities from taxing the exempted machinery, it would require the state to reimburse the municipalities for 50 percent of the property tax revenue lost as a result.

Proponents of the plan, such as Rep. David Bowles, R-Sanford, emphasized the bill would continue to provide 100 percent reimbursements to businesses for machinery already covered under the BETR program. He also stressed a provision that would provide increased reimbursements to communities with taxable values that are heavily dependent on business machinery exempted under the bill.

While the bill would provide businesses with some relief, Bowles acknowledged LD 2056 would not eliminate the business personal property tax collected by Maine’s cities and towns. Still, Bowles and other proponents argued that the bill’s exemptions triggered after April 1, 2008, would at least give businesses a signal that the state is attempting to bring stability to BETR. The program is a perennial political football in the Legislature among some lawmakers who perceive the $70 million-per-year reimbursement as “corporate welfare” and those who want the state to eliminate the business personal property tax altogether.

“The BETR program has been assailed in each new Legislature, and attempts were made to reduce, eliminate or substantially alter features and benefits of the program, thereby adding uncertainty that caused the creation of the program in the first place resulting in lower levels of investment than would likely have occurred otherwise,” Bowles said.

Several of the speakers attempted to link the tax and uncertainties over the BETR program with Thursday’s announced closure of the Georgia-Pacific mill in Old Town, prompting Taxation Committee member Sen. Ethan Strimling, D-Portland, to caution hearing participants against drawing such direct unsubstantiated conclusions.

Dana Connors, president of the Maine State Chamber of Commerce, supported the measure and said he was well aware of the concerns of municipalities that feared losing future revenues under the bill. Connors quickly pointed out there were also other ways to lose revenues.

“The irony is that without a powerful new investment incentive, Maine will slip further behind in the competition for investment and that will cause the very thing that the opponents of LD 2056 fear the most – a loss of municipal revenues as businesses and their communities slip into decline,” Connors said.

Countering Connors’ assertion, Geoff Herman, of the Maine Municipal Association, said his organization had already crunched the numbers under LD 2056 as offered and had concluded it would have cost municipalities $40 million in lost revenues had the bill been in place since 1995. The MMA would prefer to work with the committee on a reform proposal that, among other things, would call for a constitutional amendment creating a reimbursement safety net for those municipalities placed most at risk by repealing the personal property tax.

Papermaking communities such as Jay sent numerous representatives to the hearing to voice their discontent with the proposal. Few made their point clearer than Ruth Marden, town manager for the 5,000 people who live in Jay.

“If this bill, LD 2056, passes, you are effectively increasing the tax burden to every municipality in Maine and every residential and small-business owner in Maine,” she said. “The Legislature will also feel the pain as the state becomes a less attractive place to live and educate our children and [experiences] slower response times to crime and accidents with less equipment to fight fires and protect our businesses.”