Many Mainers are getting property tax bills in the mail this time of year.
The good news is that the Maine Residents Property Tax and Rent Refund Program — a smart, effective tax relief program that benefits Maine’s economy — may provide some relief.
If you spend more than 20 percent of your income on rent, or more than 4 percent of your income on your property tax bill, then you might be eligible for a refund. On Aug. 1, Maine Revenue Services released the application for refunds on property taxes assessed and rent paid in 2011.
The bad news is that lawmakers in recent years have simultaneously reduced the amount of relief available and ensured that property tax bills will continue to grow.
Maine’s property taxes disproportionately affect low- and middle-income Mainers. In 2009, property taxes took almost 10 cents from every dollar earned by individuals in the bottom 20 percent of the income distribution, compared with about 6 cents from middle-income folks and about 4 cents from the top 10 percent of income earners.
Property taxes eat up funds families might otherwise use to buy clothes for the kids or save for their education. Too often, seniors and others on fixed incomes must choose between paying their property taxes and buying food, fuel and medicine.
At a time when jobs are scarce and the state’s economy isn’t growing, we should be doing all we can to ease the burden on families pinched by property taxes and get our consumer spending-driven economy going again. Unfortunately, several actions by Gov. Paul LePage and the 125th Maine Legislature have made things worse.
First, lawmakers extended a 20 percent cut to the maximum refund available through the Circuit Breaker program as it is commonly referred to, from $2,000 to $1,600. This was part of a broader effort that reduced funding for programs important to low- and middle-income Maine families.
Second, they cut the amount of revenue the state shares with towns and cities by $90 million. This cut shifts to municipalities and property taxpayers more of the cost of providing critical public services such as K-12 education and general assistance.
Finally, lawmakers enacted large income tax cuts that mostly benefit families with annual incomes more than $80,000. These tax cuts ensure that low- and middle-income Mainers will continue to pay a greater share of their income to tax collectors than the state’s wealthiest income earners do. They reduce already-weak state revenues needed to fund important public services, further shifting costs to municipalities.
Ultimately, these cost shifts will hit Maine’s poorest towns and property taxpayers the hardest.
While municipal and county tax caps and the recession have helped slow the growth of property taxes in recent years, property tax collections are increasing faster than inflation for a variety of reasons, including increased demand for services, rising costs of running a town or city, and reductions in state funding.
With lawmakers ensuring that property taxes will continue to grow and strain low- and middle-income Mainers, the Circuit Breaker program is more important than ever. There are a number of ways lawmakers can strengthen and improve it.
First, they should fully fund the Circuit Breaker, restoring the maximum refund to $2,000. Based on 2010 data, this would put an additional $10 million in the pockets of Maine families with annual incomes below $60,000, the people most likely to put that money back into the economy immediately by spending the refund on necessities such as groceries, gas and school supplies.
Second, lawmakers must increase the number of Circuit Breaker refunds. Although the average refund for non-elderly participants was almost $500 in 2010, less than half of eligible Mainers participate in the program. Given the potential benefits for families struggling in the wake of a recession, an enrollment rate that low means something is wrong with the application system. It should be fixed.
These improvements would put more money in the pockets of low- and middle-income Mainers, providing a much-needed boost for families and our state’s economy.
Joel Johnson is a policy analyst at the Maine Center for Economic Policy.
To learn if you are eligible for a Circuit Breaker refund and get more information, visit http://www.maine.gov/revenue/taxrelief/tnr.htm, email [email protected] or call (207) 626-8475.