During the Legislature’s opening day this month, I was eager to know what would be the Big Thing of the session. In a gubernatorial election year, I figured it would have a strong political coloration.
In the House lobby, I met an intelligent Democratic state representative who has always leveled with me. I invited him to speak off the record so he could point me in the right direction.
“The big thing is the repeal of the business equipment tax,” he told me. “It’s Baldacci’s big thing. It’s an election year, and we’ve all got to get behind him on this.”
“Let me get this straight,” I responded. “This is being done for Baldacci’s re-election? He’s way down in the polls, and he’s going to get a bill passed that will shift the tax burden from the corporations to residential-property taxpayers, and he expects to gain votes on that? How many votes will he get from Republican CEOs?”
He admitted this was food for thought. I felt smug in my political insight.
The tax in question is officially called the "personal property tax," but the towns and cities levy it only on the value of business equipment and machinery, taking in $150 million-plus a year. Most states have some version of it. In 1995, the state began reimbursing companies for the taxes paid, for a term of 12 years for each piece of equipment, through a program called BETR, the Business Equipment Tax Reimbursement.
Supposedly, this tax break encourages companies to locate or expand here. Big corporations like the paper companies and National Semiconductor get most of the money — this year about $75 million. The state gives a BETR reimbursement even when a corporation doesn’t pay the tax because the town has given the company a tax break of its own called Tax Increment Financing. In this case, the company is said to be “double-dipping.”
The bill the governor submitted last year to repeal the tax — carried over to this session — would keep the taxes flowing to the towns and the BETR checks flowing to the companies for existing equipment and machinery for the rest of their 12-year terms. But new purchases would not be taxed. The state would reimburse municipalities for their losses at 75 percent for the first two years, then only at 50 percent. The state’s constitution guarantees a 50-percent reimbursement.
Who would make up the remaining 50-percent tax loss to the towns, especially in the mill and service-center communities that really rely on the tax? You would — in the increase in your home’s property tax or the increase in rent you pay to the landlord who pays property taxes.
I wanted to know more. For one thing, why was the repeal of this municipal tax such a Big Thing when the state reimburses the businesses? Fortunately, in the legislative session’s second week, the Maine Center for Economic Policy, a liberal think-tank, held its annual conference, at the Augusta Civic Center. The conference’s main topic was business taxes. And the governor was the first speaker.