Tax-rebate scam costs Maine taxpayers millions

0

Three-card Monte, Nigerian princes, New Markets Tax Credits — what do they have in common? They promise big returns if you will just put your money up front. But you wind up a lot poorer and, hopefully, a bit wiser from the experience.

Some out-of-state companies have bilked Maine taxpayers out of millions of dollars — $35.5 million to be exact — with a 21st Century financial con job that promised new hope for shuttered or faltering Maine mills and the men and women with jobs hanging in the balance, but grabbed the money and hit the road.

The story gets worse: Because some Republicans in the Maine Legislature recently rejected legislation that would have held these companies accountable and prevented further abuses in a state tax-credit program, Maine taxpayers will remain on the financial hook for millions in taxpayer dollars annually to the very same companies that orchestrated complex financial schemes completed in a single day without making any mill upgrades at all.

The Maine Legislature created the New Markets Capital Investment Program in 2011 to encourage new capital investments in aging mills in economically distressed parts of Maine. The problem is, instead of upgrading old mills to keep them running and Maine people working, companies have claimed $35.5 million in tax rebates for “investments” that were never actually made in Maine mills.

Advertisement

Instead, these companies used financial maneuvers that the IRS calls “sham transactions” to con Maine taxpayers out of millions. Those abuses were documented in a two-part series in April by Maine Sunday Telegram reporter Whit Richardson.

I often wonder, when I see the old Wausau Mill here in Chisholm that closed in late 2008 and early 2009 leaving more than 200 Mainers out of work, how many paper makers might still be working there if we had a program back then that actually invested in Maine mills and their workforces.

How many Maine mill owners might have been able to upgrade their facilities with the $35.5 million we were cheated out of through the New Markets program? How many employers in western Maine and other economically distressed regions might have been able to keep mills operating? How many Maine employers, workers would still have jobs to support their families?

Many workers in my legislative district (Jay, Livermore and Livermore Falls) must now commute to jobs in Lewiston, Augusta, Bath/Brunswick and Portland.

Through my work as a job service manager for the Maine Department of Labor from 1984 to 2003, we talked regularly with workers and unemployed workers in those communities.

We helped workers find jobs and get back on their feet after layoffs or mill closures. We also helped unemployed workers, who qualified and chose retraining/education to find a new career or to relocate if they found qualifying work elsewhere.

While Maine taxpayers are footing the bill for the millions of dollars companies received that benefited from the New Markets tax scam, thousands of Maine workers have lost the ability to work in their own communities.

Although I retired from the Department of Labor in 2003, my work instilled in me a sense of urgency to make sure the state’s economic-development programs work for Maine people.

Legislators owe it to all Maine taxpayers to ensure those tax-credit programs accomplish their intended purposes, to fix them if they don’t, and to hold accountable those who benefit by gaming the system.

That is why I voted with the majority on the Legislature’s Labor, Commerce, Research and Education Committee to stop further abuse of the $50 million remaining in the New Markets program and to reject a request from the Finance Authority of Maine for an additional $250 million for the program.

The majority also developed legislation to prevent future payoffs for bogus investments and sham transactions. The Maine House approved this legislation, but Republicans in the Maine Senate killed it. They should be held accountable for millions in taxpayer dollars lost on a scheme worthy of Charles Ponzi or Bernie Madoff. Legislators should invest in Maine businesses and Maine workers, not out-of-state scam artists.

Rep. Paul Gilbert, D-Jay, is a fourth-term member of the Maine House of the Representatives who serves on the Labor, Commerce, Research and Economic Development Committee.

Advertisement
SHARE