We appreciate the Task Force’s efforts, pursuant to Part KKK of PL 2011, chapter 380, to prioritize services, consolidate functions, and eliminate duplication and inefficiencies. In doing so, we respectfully encourage the Task Force to adopt a balanced approach that considers savings from all parts of the budget, including revenues, and to take into account the effects of your decisions in both the short and long terms.
Specifically, we urge the Task Force to assess the effectiveness, efficiency, and priority of the many tax expenditures in Maine’s tax code. Maine has more than 100 personal and corporate income tax and property tax reimbursement programs, as well as more than 100 sales and excise tax exceptions. As Maine Revenue Services (MRS) accurately recognizes, a substantial number of these “expenditures are the equivalent of a governmental subsidy in which the foregone tax revenue is essentially a direct budget outlay to specific groups of taxpayers.”
Tax expenditures deserve the same level of scrutiny and review that all government programs receive to determine their cost effectiveness. As this Committee considers, for example, cutting funds for Head Start, a cost-effective program that provides critical services to low-income children, it should also evaluate tax expenditures, such as the reimbursement for taxes paid on certain business property program (BETR), the fuel and electricity used at a manufacturing facility exemption, and the machinery and equipment exemption, which are expected to cost (respectively) $46.8 million, $24.4 million and $22.7 million in FY 2013.
We are not suggesting the elimination or reduction of any specific tax expenditures, including the three referenced above. Rather we urge the Task Force to consider all options and adopt a balanced approach to identify $25 million in savings pursuant to Part KKK. The Maine State Tax Expenditure Report: 2012 – 2013 produced by Maine Revenue Services provides a comprehensive list of tax expenditures for the Task Force to review.
We recognize that this Task Force must make many difficult choices in recommending $25 million in spending reductions. We respectfully urge you to evaluate all options and make the most informed decision possible. This includes analyzing and evaluating Maine’s tax expenditures to ensure their efficiency and cost effectiveness. We also reiterate our concern for the impact that your decisions will have on Maine families and small businesses today and for many years to come. Clearly the recession’s impact on the state budget has been deeply felt. Our collective challenge is to pursue solutions that are balanced, minimize the damage for Maine people, and leave us better positioned to achieve future prosperity. We hope you will continue to view the Maine Center for Economic Policy as a resource and ally in accomplishing this.
Thank you for your consideration.
Maine Center for Economic Policy