A campaign finance watchdog group published a report Thursday showing that 23 of the top 25 beneficiaries of two business equipment tax-break programs have given $2.3 million to political committees and candidates since 2000 and received a total of $135 million in tax relief over the last four years.
State lawmakers are considering changes to programs that reimburse businesses for taxes paid to municipalities on equipment investments. A spokesman for Maine Citizens for Clean Elections, which issued the report, said recent attempts to change tax-break programs have met fierce resistance from the business community, although the companies may have had other reasons for trying to influence public policy through campaign donations.
The programs cost the state $68.9 million in tax revenue last year, and questions have been raised about their public benefits. A report in 2006 by the Legislature’s nonpartisan Office of Program Evaluation and Government Accountability identified the programs as “high risk” investments because of undefined goals, overlaps with other tax breaks and a lack of independent audits.
B.J. McCollister, program director for Maine Citizens for Clean Elections, said the report is not a “smoking gun” but shows that “the businesses that are benefiting from these tax breaks are also making sizable campaign contributions to benefit the very lawmakers who determine the future of the programs.”
Businesses have traditionally defended the programs, the first of which was introduced in 1995 by independent Gov. Angus King, who said the tax breaks would attract business and encourage growth in Maine.
Dana Connors, president of the Maine State Chamber of Commerce, said he doesn’t see the connection between the defense of tax programs and political donations.
“I’m not aware of a business that uses this issue as a litmus test for supporting a candidate,” he said. “Businesses use a host of reasons for political giving.”
Connors’ group has been at the forefront of defending the programs, arguing that they level the playing field between Maine and states that don’t tax business equipment at all. He said businesses that invest in infrastructure are doing so to remain competitive and create jobs.
In 2011, a study affiliated with the Council of State Chambers of Commerce showed that the two equipment reimbursement programs, combined with “one of the lowest” state and local sales tax rates in the country, helped put Maine at the top of all states for lowest taxes on new business investment.
Many states offer a variety of tax credits to provide incentives for businesses, according to the National Conference of State Legislatures. Credits for machinery and equipment are among the most common incentives, although at least 30 states tax such purchases.
While states have looked to tax breaks to increase their competitiveness in luring businesses and jobs, Maine is among several states that are re-evaluating the programs, some of which don’t have defined goals or metrics for success.
The report by Maine Citizens for Clean Elections lists the biggest beneficiaries of the programs in 2012, along with their political contributions to candidates, party committees and political action committees since 2000.
The top five beneficiaries in fiscal year 2012 and their contributions are:
• Verso Paper, which received $4 million in tax reimbursement in 2012 and made $204,773 in political contributions since 2000.
• Bath Iron Works, which received $3.4 million and contributed $104,600.
• S.D. Warren/Sappi Paper, which received $2.8 million and contributed $51,000.
• Katahdin Paper/Cate St. Capital, which received $2.4 million and contributed $2,000.
• National Semiconductor, which received $1.9 million and contributed $135,200.
Among the top 25 tax rebate beneficiaries, the leading political donor since 2000 was Nestle Waters North America, which received a $1.8 million equipment purchase rebate in fiscal year 2012.
Two companies among the top 25 beneficiaries made no political contributions: Shaw’s and Rumford Paper. Nine companies had contributions of less than $10,000 since 2000.
Political contributions aside, business groups have worked hard to protect the reimbursement programs. Earlier this year, business interests lined up to testify against a proposal by Gov. Paul LePage to eliminate the Business Equipment Tax Reimbursement program, which King implemented in 1995. LePage hoped to transition directly to the Business Equipment Tax Exemption, to save $11.8 million in the state’s current budget.
Businesses, including many representatives of the paper industry, said the measure would make them less competitive. Maine paper companies are among the heaviest users of the program, according to Maine Revenue Services data.
Lawmakers ultimately scrapped the governor’s proposal in favor of creating a study commission that includes business leaders and municipal officials.
According to its report to the Legislature’s budget-writing committee, the panel has recommended a gradual, four-year transition from the Business Equipment Tax Reimbursement program to the Business Equipment Tax Exemption program, to ease the hardship to municipalities and spread out the impact on businesses.
The recommendations will be considered by lawmakers and drafted into legislation to be considered next year.
Steve Mistler can be contacted at 791-6345 or at: