AUGUSTA — As Democratic and Republican lawmakers struggle to agree on how to save $40 million in the state budget by reducing or eliminating tax cuts or breaks, Maine’s cities and towns are bracing for potential cuts to their state revenue sharing.
A task force that sought to find the savings in the tax code presented its recommendations to lawmakers Thursday, but the proposals already have drawn criticism from Republicans and Democrats, signaling the difficulty the two parties will face as they seek an agreement in the coming months.
The recommendations include limiting tax credits for the restoration of historic buildings and cutting a tax reimbursement program aimed at encouraging businesses to hire new employees. Other proposals would eliminate a property tax reimbursement program for some stores and find ways to tax the purchase of online video and audio streaming.
Maine’s cities and towns fear the state won’t be able to make those changes, which would result in an automatic $40 million reduction in revenue sharing, almost entirely gutting the program, said Geoff Herman, director of state and federal relations for the Maine Municipal Association.
“It was kind of a Herculean task anyway. People who gave Hercules his tasks didn’t expect him to do them. And it seemed like this was almost set up like that,” he said.
Maine’s municipalities typically received 5 percent of all state sales and income tax revenue, about $145 million. But about $73 million was cut this fiscal year and about $83 million is to be cut in the next. The result has been increased property taxes, Herman said.
In a letter to the co-chairs of the Appropriations Committee, a group of House Democrats said they have “deep concerns” with the recommendations and the fact that the process could lead to further revenue-sharing cuts.
They’re calling on the committee to focus on scaling back tax breaks for large corporations and breaks for banks on portfolio management, and getting rid of tricks that let large out-of-state companies pay less in taxes.
“Their recommendations are strong, but they need to make sure they look at it closely and dig deep,” said Democratic Rep. Lori Fowle of Vassalboro. “That’s our stance … that they’re looking at this as hard as they can to find the $40 million and not turning back and saying, â€˜I guess we’ll have to go into revenue sharing.’ ”
Republicans have criticized Democrats for refusing to look at ways to cut spending as well. They say the task force was supposed to focus on identifying credits that are no longer effective, but instead is proposing new taxes on students and small businesses.
“The task force needs to go back to the drawing board and Democrats need to come forward with their ideas to reduce state spending or else our budget will be out of balance,” said Republican Rep. Ken Fredette of Newport in a prepared statement.
Democratic Rep. Peggy Rotundo of Lewiston, co-chair of the budget-writing committee, said members will review the recommendations when they return in January and determine the best way to move forward.