Testimony at Hearing on LD 816 and LD 956

Property taxes hit low- and middle-income Maine families hardest, accounting for the greatest share of taxes they pay. The Maine Residents Property Tax and Rent Refund Program, more commonly known as the circuit breaker, is the best program for reducing property taxes for Maine families who need it most. Economists and tax policy experts share this view, as evidenced in a report MECEP published in 2006 entitled, “Does the Circuit Breaker Relieve the Burden?” co-authored by Michael Allen and Richard Woodbury. In this report the authors conclude:

“What the circuit breaker does well, however, is to contain the burden for those whose burden is highest. It does more than any other form of property tax policy to assure that people can afford the out-of-pocket burden of paying their property taxes.”

Unfortunately, the circuit breaker program has yet to live up to its full potential and, in recent years, reduced benefit levels have undermined the program further. The fact that the Governor’s budget slates this program for elimination for households under age 65 is an even greater concern. I commend members of this committee for rejecting this part (Part L) of the Governor’s budget proposal.

LDs 816 and 956 offer sensible solutions to improve the existing program. In particular, the changes to the application process suggested in LD 816 are long overdue. We should do everything possible to make it easier for eligible individuals and families to access the circuit breaker. Such improvements should include: allowing taxpayers to submit applications through the Department of Health and Human Services’ integrated system for determining eligibility for other services like MaineCare; synchronizing the application period with the income tax filing period; and merging the circuit breaker application with state income tax form 1040. The maximum benefit adjustment from $2,000 to $3,000 proposed in LD 956 is also warranted. Over time, the value of program benefits has diminished. To maintain a constant relationship between income and property taxes as a share of income and keep pace with inflation, benefits need to increase over time. Furthermore, the 20 percent reduction in benefits enacted over the last two budget cycles has diminished the value of the program even more for those who need it most during tough economic times.

In addition to these changes, MECEP encourages the committee to include language in a final proposal that improves outreach and marketing to make more families aware of the hundreds of dollars in tax relief available to them. History shows that improved outreach and marketing can make a difference. A $50,000 marketing campaign in 1999 included television and radio advertisements and increased circuit breaker enrollment substantially.

Ultimately, delivering property tax relief to those who need it most offers significant benefits for direct beneficiaries and for Maine’s economy more broadly. At a time when lack of consumer demand continues to be a drag on our economy, putting money – as much as $100 million – in the pockets of Maine families who need it most and are most likely to spend it is a win-win.  It can help stabilize household budgets and help stimulate economic activity.

Included with my testimony are additional materials including excerpts from the 2006 paper written by Michael Allen and Richard Woodbury on the circuit breaker program, a Maine Revenue Services summary of the number of households and average household benefit under the current program by town, and a new report, “Give Maine Working Families a Break: Fix and Fund the Circuit Breaker,” by MECEP economist Joel Johnson.

I appreciate your consideration of these materials and for your service to the people of Maine. I look forward to working with you to identify solutions to these issues.

Garrett Martin, MECEP Executive Director of the Maine Center for Economic Policy testifying before the Joint Committee on Taxation in favor of LDs 816 and 956.