AUGUSTA – The perpetual notion that Mainers pay the highest taxes in the nation, an argument heard everywhere from legislative debates to kitchen tables, has been debunked by the same national policy group that has ranked Maine first in the past.

The Tax Foundation of Washington, D.C., a nonpartisan but fiscally conservative research organization, released its annual state rankings this week and listed Maine a surprising 15th.

Maine has been ranked first on the same list many times, most recently in 2005, and has been second to Vermont each of the last two years.

However, a change in the study’s methodology that is reflected in this year’s data saw states with a high percentage of nonresidential property taxes – such as Maine – improve their rankings dramatically, a Tax Foundation spokesperson said.

Such taxes are higher here because of the number of second homes or vacation properties owned by out-of-state residents.

“Until now, we haven’t been able to get an accurate sense of nonresident home ownership,” William Ahern, Tax Foundation communications director, said Friday in a telephone interview. “With new data, our study keeps getting better and better.”

State Democrats hope the new rankings, which reflect the 2008 fiscal year that ended June 30, might help dispel the perception that the Pine Tree State leads the pack when it comes to taxes.

“I’m glad that organizations are getting a closer read on what’s going on,” said Sen. Joseph Perry, D-Bangor, who is chairman of the Legislature’s taxation committee. “Quite honestly, you can rank us number one or number 15, but it doesn’t make it easier for homeowners to make their tax payments. But the idea that Maine has the highest taxes has overshadowed everything and really affected perception.”

Sen. Richard Rosen, R-Bucksport, said the news was encouraging, but he’s not convinced it means much.

“I’m still not sure it reflects the weaknesses in our economy,” he said. “Taxes and high tax burden are a symptom of spending; that’s the critical issue.”

The Maine Heritage Policy Center, a conservative organization based in Portland, released a statement Friday criticizing the new formula used by the Tax Foundation.

“These taxpayers may live somewhere else, but the taxes are still collected by the state,” chief economist Scott Moody said in the statement, referring to vacation home owners. “These people are longtime Mainers who avoid our high taxes by establishing residency in a state like Florida with no income tax or estate tax. No matter where the taxpayers live, these taxes support a state government that is too large and spends too much.”

Moody worked for the Tax Foundation in previous years when the group’s study used a different formula. Ahern defended the new formula but agreed that although Maine improved in the most recent rankings, it has work to do.

“Maine still has fairly high taxes, but they are now closer to the national average,” he said. “Still, the tax burden ranking is still much higher than income ranking [34th among 50 states]. Most of the other high-tax states also are very high-income states.”

The Tax Foundation report ranks states on the percentage of collective income that is paid on state and local taxes. The national average for 2008 is 9.7 percent (down from 9.9 percent a year ago), while Maine’s rate was 10.0 percent. Under the old data, Maine paid 13 percent of its income in 2005, the last year it topped the list. However, the Tax Foundation updated its rankings for the last 30 years to reflect the new methodology, and Maine only ever ranked as high as fifth under the new formula.

The states with the highest tax burdens for 2008, according to the report, were New Jersey (11.8 percent) and New York (11.7). The state’s with the lowest were Alaska (6.4 percent) and Nevada (6.6 percent).

Ahern said it’s important to note that the Tax Foundation study does not include state-level specifics.

“We’re looking at states from 30,000 feet so to speak,” he said. “But the study has gotten better and will continue to get better.”

Maine House Majority Leader Hannah Pingree of Northhaven said, if nothing else, state legislators and others have more accurate information to debate.

“I don’t know that it necessarily helps our agenda, but it’s important for the public to have an accurate perception,” she said.

Legislators have bemoaned the high-tax label for years, particularly as it has affected potential commercial growth.

“When people are expanding or creating new businesses, they certainly take taxes into account,” Ahern said.

Perry said he thinks the report is most significant because “anti-taxers” always referenced the Tax Foundation when it listed Maine near the top for tax burden.

“Now that groups are more accurately counting what we’re paying, we can work on lowering the tax burden with perhaps more success,” he said.

The Tax Foundation’s report can be found online at: www.taxfoundation.org.

erussell@bangordailynews.net

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