A bipartisan group of lawmakers have agreed to recommendations to strengthen Maine’s tax code. At issue is how to ensure that spending through the tax code in the form of exemptions, deductions, and incentives has proper oversight and delivers intended results.
Maine forgoes over $4 billion in revenue every year through spending through the tax code, commonly referred to as tax expenditures. Since taxes fund our future and keep our roads and bridges in good condition, our water safe to drink and air clean to breathe, and our schools of the highest grade, it’s important that we maximize the value of public resources. As I wrote in the Portland Press Herald, programs that use public funds should be well designed so that money raised through taxes is not wasted, strengthens our communities, and promotes long-term growth and opportunity for all Mainers.
The eight lawmakers who were members of the bipartisan Tax Expenditure Review Working Group made several recommendations that the full Legislature should adopt. These include:
- Prioritizing business incentive tax expenditures for full evaluation.
- Expanding the information available on the costs of tax expenditure programs.
- Obtaining better information on the utilization of certain programs, particularly those that aim to improve the economic security of low- and middle-income households.
These measures will improve the ability of the legislature to evaluate the costs and benefits of a range of programs and to ensure that they are being properly utilized by intended beneficiaries. For example, many business tax expenditures give large tax breaks to businesses in exchange for certain outcomes such as job creation. Absent a thorough evaluation of these programs, it is anyone’s guess as to whether they are delivering the intended results. Prioritizing these programs for a full evaluation makes perfect sense.
Similarly, Maine has several programs — Property Tax Fairness Credit, Sales Tax Fairness Credit, Earned Income Credit, and Credit for Educational Opportunity — that are intended to boost incomes, limit the impact of property and sales taxes, and help pay for educational expenses for individual taxpayers. Understanding the extent to which these programs are being underutilized, especially by those who need them most, could provide the foundation for future improvements and greater up-take.
In addition to the overarching recommendations above, the working group made several other recommendations that are more technical in nature. These would make it possible for the committees involved in overseeing this work — Government Oversight and Taxation — to effectively complete their work. These recommendations include:
- Improve coordination between the Government Oversight Committee and other legislative committees by including two members of the Taxation Committee and one member of the Committee on Innovation, Development, Economic Advancement and Business among the 12 members of the GOC.
- Authorize the Taxation Committee to meet year-round to better fulfill tax expenditure review responsibilities.
- Make changes to the Expedited Review process — used for tax expenditures that are intended to implement broad tax policy goals that cannot be reasonably measured — including discontinuing the involvement of the Office of Program Evaluation and Government Accountability (OPEGA) which has completed its reviews of all programs in this category.
- Prepare new and existing tax expenditures for future evaluation. The recommendations propose doing this in two ways:
- Establish a one-time legislative task force with the purpose of identifying tax expenditure statutes and determine which ones do not include language needed for evaluation.
- Establish a process for the Taxation Committee to review proposed legislation to ensure any bills likely to receive full evaluation by OPEGA include elements needed for full evaluation, including policy goals, intended outcomes, and provisions for data collection.
- Create the ability for the Taxation Committee to request two “limited analysis” projects per year from OPEGA of less than 30 days duration that would help facilitate consideration of pending legislation by providing timelier information.
- Increase staffing at OPEGA by at least one full-time position and consider whether OPEGA and the Taxation Committee require greater resources to carry out these recommendations.
- Change some of the Department of Economic and Community Development’s (DECD) statutory responsibilities relating to tax expenditure evaluation.
Creating a more robust tax expenditure review process and having bipartisan support, the Maine Center for Economic Policy urges the Legislature to adopt these changes this session. We must continue to improve how we evaluate the effectiveness of programs that restrict direct investments in healthy families, good jobs, quality education, and other efforts that support communities and ensure Maine people thrive.
