LEWISTON — Changes to a state rent and property tax relief program aimed at helping low- and middle-income individuals and families are catching many who benefited from the program off guard.
Many are no longer eligible for the programs and others are learning that their rebates have been steeply cut.
About 75,000 Maine households will no longer be eligible for rebates under the so-called circuit-breaker program, according to a state analysis of the changes made earlier this year by the Legislature. Income limits were decreased from $87,000 per year for households and $65,000 a year for individuals to $40,000 for all.
Property owners must pay at least 10 percent of their adjusted gross income in property taxes to be eligible for rebates. The previous rate was 4 percent.
Renters must pay at least 25 percent of their incomes for housing to be eligible, the previous rate was 20 percent.
The new maximum rebate is fixed at $300 for those under age 70 and at $400 for those older than 70. The previous rebate amount was capped at $1,600.
"They've just gutted the program; it's unbelievable what they've done to it," said Richard Smith, a Lewiston property taxpayer who is retired. "I think they are just one step away from doing away with it altogether."
Smith said his income is fixed at about $40,000 a year and he pays about $3,000 a year in property taxes.
In 2012, he received a rebate of $550, but under the new formula he will be ineligible for a rebate because he doesn't pay 10 percent of his income in property taxes. Smith would have to pay $4,000 in taxes to be eligible for the program and even then his rebate, because he's over 70, would be no more than $400.
Applications for the rebates, previously filed in August, will now be filed with a person's state income taxes in the beginning of the year.
The changes saved the state budget $17.8 million and are a compromise between the Legislature and Gov. Paul LePage, whose proposal would have kept the maximum rebate amount the same but would have even more dramatically reduced the numbers eligible to receive the credit.
LePage's proposal would have saved the state $31 million and would have limited rebates to residents 65 and older.
Democratic lawmakers involved in the final state budget negotiations said they compromised with Republicans to save another popular property tax relief program, the Homestead Exemption. That program allows a discounted tax rate on a primary residence, by exempting the first $10,000 of a home's value from taxes. The state reimburses local municipalities for the lost revenue.
Democrats say they realize the new limits on the rebate programs are too strict and said they intend to offer legislation that will change that while increasing maximum rebate amounts.
Rep. Adam Goode, D-Bangor, House chairman of the Legislature's Taxation Committee, said at least one bill carried over for 2014 could become a vehicle for restoring the programs.
"Democrats very much support the circuit breaker and its goals of helping middle-income, lower-income property taxpayers," Goode said. "We were very clear on the Taxation Committee that the shifts both in the cuts to revenue-sharing and in the cuts to circuit breaker and Homestead Exemption were very tough pills to swallow."
Rep. Peggy Rotundo, D-Lewiston, House chairwoman of the Legislature's budget-writing Appropriations Committee said Republicans refused to roll back previously passed state income tax cuts worth about $400 million. She said the result was reductions in state spending on tax-relief programs.
"Because Republicans refused to give on those income tax breaks for the very wealthy, we ended up paying for them by taking away property-tax relief programs," Rotundo said. "We were told by our Republican colleagues that (the income-tax cuts) were non-negotiable. They refused to budge on those."
Rotundo said Democrats feared being unable to pass a state budget, so they gave up on trying to roll back the income-tax breaks.
She said that concession allowed Democrats to protect against an elimination of state revenue-sharing with local governments, which would have had a dramatic impact on local property taxes.
"We couldn't get everything we wanted; we had to compromise," Rotundo said. "But we will go back and keep pushing to make sure that working Mainers and people on fixed incomes get that property-tax relief they need. To use those to pay for tax breaks for the wealthy is just very unfair."
Jodi Quintero, spokeswoman for House Democrats and Speaker Mark Eves, D-North Berwick, said Eves has a bill that will come up for consideration in 2014 that looks to address the issues around property tax relief, expanding eligibility for relief programs and increasing rebate amounts.
But it seems unlikely Republicans will go along with those proposals.
David Sorensen, a spokesman for House Republicans, said it was disingenuous for Democrats to say they were dissatisfied with the budget compromise they brokered and which gained broad bipartisan support.
"The state doesn't collect property taxes, local government does," Sorensen said. "And the only way we are going to see true property-tax relief is to rein in local spending."
Sorensen said local government spending over the past 20 years has increased at a rate twice as fast as state spending. "It's not up to us," Sorensen said. "It is up to the local governments to get their spending under control."
He said property taxes in Maine have increased by 123 percent over the past 20 years.
"The bottom line is, the spending has got to stop and when we are talking about property taxes, that's spending at the local level," Sorensen said.