Testimony in Support of L.D. 474, An Act to Reduce the Property Tax Burden and Improve the Circuit Breaker Program

MECEP strongly supports LD 474. 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.

The Maine Residents Property Tax and Rent Refund Program (“Circuit Breaker Program”) provides tax relief to 88,500 Maine individuals and families, although an estimated 200,000 are eligible for a refund. In Fiscal Year 2010, 75,544 general refunds and 12,993 senior refunds were issued. The average general refund was $472 and the average senior refund was $364. Current law provides for a maximum $2,000 benefit, but the previous two years each provided for a $1,600 maximum benefit because of a 20% reduction in the program.

This bill would expand the credit by 20% so that the maximum benefit would be $2,400. Expanding the benefit could not come at a more critical time. 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.

The burden of these 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.” Moreover, the Circuit Breaker Program benefits taxpayers with fixed incomes who live in places with rapidly increasing property values and taxpayers who may have experienced, through no fault of their own, a significant decrease in their income. We only need to look as far as the more than 52,000 Mainers who are unemployed, many as a result of the Great Recession.

It is also important to note that money that was spent on property taxes but was 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.

LD 474 not only expands the maximum benefit but it simplifies the application process so that it runs with the income tax filing period and allows for application through the Department of Health and Human Services’ integrated eligibility system (ACES). These two measures should help increase program participation rates at a time when more Mainers need the benefit of the Circuit Breaker Program to offset potentially increased property tax liability.

Ensuring expanded tax property tax relief rather than reduced property tax relief for low, moderate, and middle income Mainers is as important as ever. For the reasons stated above, MECEP urges this Committee to pass unanimously LD 474. 

Dan Coyne, Fiscal Policy Analyst, testifying before the Joint Standing Committee on Taxation in favor of LD 474, “An Act to Reduce the Property Tax Burden and Improve the Circuit Breaker Program.”