Monday, March 10, 2014
By John Christie and Naomi Schalit Maine Center for Public Interest Reporting
AUGUSTA — Over the past 50 years, Maine legislatures and governors have added millions of dollars in tax breaks for businesses without ever doing the detailed analysis to find out which are effective and which are wasteful.
But now that may be changing.
In recent weeks, a growing list of legislators have called for a review of programs that leading economists have critiqued for not delivering on promises to create jobs.
“We put a lot of stock in these programs, but we never go back to see if they work,” Sen. Emily Cain, D-Orono, told the legislature’s taxation committee last week.
Tax expenditure programs are defined as any loss of state tax revenue due to Maine law “that allows a special exclusion, exemption or deduction or provides a special credit, a preferential rate of tax or a deferral of tax liability.”
Cain has proposed a bill, L.D. 1488, that would require the tax committee to recommend which tax expenditure programs should be kept, repealed or changed and then would require the full legislature to hold an up or down vote of them as part of the budget approval.
Another bill calls for research on whether the $50 million property tax break for business equipment known as BETR, is meeting it goals (L.D. 317); an “independent academic policy analysis” of tax breaks (L.D. 1255); and determining “the best way to achieve the goals of tax expenditures in the most effective and efficient manner possible and to ensure transparency and accountability” (L.D. 1463).
Rep. Peggy Rotundo, D-Lewiston, the sponsor of the latter bill and cosponsor of Cain’s bill, has been a longtime member of the legislature’s appropriation committee, where she said, “We pore over every expenditure, now matter how small it is.”
But the millions in tax expenditures “receive no oversight from the committee … and we owe that to the people of the state of Maine.”
Currently, while lawmakers get the list of programs each budget year, the annual cost of each is never voted on. Instead, programs live on, new ones are created and old ones rarely, if ever, are repealed.
The co-chair of the taxation committee, Rep. Adam Goode, D-Bangor, calls this $504 million annual cost, “a secret budget.”
Tax expenditure programs range from breaks for businesses to loopholes for special interest to exemptions designed to help worthy causes.
— A sales tax exemption for fuel and power for businesses that costs about $24 million per year
— A sales tax exemption for school meals, representing lost taxes of $10.8 million
— Businesses in Pine Tree Enterprise Zones get a income tax reduction that costs $3.3 million each year.
— Retired military dentists get a tax deduction on their pension in order to encourage them to set up practice in Maine, a cost of about $50,000 annually.
The annual tax expenditure list compiled by the Maine Revenue Services is 213 pages long and the printed version comes with a red cover that is often waved at tax committee hearings as an example of the complexity of the problem.
The question, “Which one would you kill?” is asked repeatedly during committee hearings where witnesses criticize the programs.
Cain said, “That question is too broad because we don’t have the data. It drives me crazy … because it can’t be answered except with anecdotes.”
Existing studies – both national and specific to Maine – have not provided legislators the level of detail they say they need to determine which programs meets their goals, such as job creation. If they had that data, they say, they could vote to keep, kill or even expand programs.
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