“By expanding the maximum benefit and simplifying the application process to increase program participation, this bill helps provide meaningful property tax relief to more Mainers at a time when they need it the most,” said MECEP Fiscal Policy Analyst Dan Coyne. “L.D. 474 would expand the Circuit Breaker credit by 20% with a $2,400 maximum benefit. Money that people otherwise paid in property taxes but is refunded will be spent in the local economy. This is good news for economic growth: the more money spent in the local economy means more sales for local businesses.”
The “Circuit Breaker” Program provides tax relief to roughly 88,500 Maine individuals and families. In Fiscal Year 2010, the program issued 75,544 general refunds and 12,993 senior refunds. The average general refund was $472 and the average senior refund was $364. Current law provides for a maximum $2,000 benefit; however, due to a 20% reduction in the program, the maximum benefit was $1,600 in the previous two years. Coyne also noted that simplifying the Circuit Breaker application process would encourage more participation from the estimated 200,000 Maine taxpayers eligible for a refund.
“Expanding the benefit could not come at a more critical time,” Coyne added. “With cost shifts imminent to municipalities as a result of proposed budget cuts at both the federal and state levels, local governments will likely have to raise property taxes to maintain services and employment levels. Indeed, it seems that newspaper headlines are detailing daily proposed increases in municipal property taxes and proposed layoffs.”
Coyne told the Committee that the burden of impending property tax increases will disproportionately affect low- and moderate-income working Mainers. According to the Institute on Taxation and Economic Policy, “low-income families (nationally) paid 3.7 percent of their income in property taxes in 2007, while middle-income families paid 2.9 percent of their income and the wealthiest taxpayers paid just 1.4 percent.” Coyne noted that the Circuit Breaker Program benefits taxpayers with fixed incomes residing in communities with rapidly increasing property values. He added that the Circuit Breaker provides relief to taxpayers who, through no fault of their own, have experienced a significant decrease in their income, including the more than 52,000 Mainers who remain unemployed, many due to the Great Recession.
General Circuit Breaker eligibility applies to individuals with an annual income of $64,950 or less and $86,600 for individuals living with a spouse and/or dependent(s) whose property tax was more than 4% of household income; or whose rent you paid was more than 20% of annual household income. Senior citizens who resided in Maine for the entire tax year are eligible at age 62 (55 if disabled) with total household income below $14,700 for a person who lived alone or $18,200 for a person who lived with a spouse or dependent.