Many Maine homeowners feel like their property taxes are worse than ever. But are they?
Many Maine homeowners feel like their property taxes are worse than ever. But are they?
It was 1975.
Marshal Matt Dillon sipped his last sarsaparilla on “Gunsmoke.” Leisure suits ruled the dance floor. Everyone wanted a pet rock. The most popular car: an Oldsmobile Cutlass.
The average local property tax bill in Maine was $387.
That bill chewed up about 4 percent of people’s incomes.
It still does, according to state data. The property tax burden in Maine – as a percent of income – is almost identical today to 30 years ago.
Yet more than a half-dozen relief plans await debate as people rush to fix the property tax problem.
So what’s the problem?
For a five-year stretch incomes in Maine grew faster than municipal budgets. That stopped in 2001.
Property values have shot up in the last five years along the coast.
The tax burden is shifting in some communities from commercial and industrial taxpayers to residents.
And economists say a healthy dose of perception is also involved. If enough people say property taxes are skyrocketing, well, then they are.
“It’s not a uniform problem for everyone i n Maine,” said Kit St. John, executive director of the Maine Center for Economic Policy.
And maybe property taxes have just been too high right along.
Nothing’s simple.
Billing for bull
In the 1700s, when Maine was Massachusetts, local assessors visited farms to levy property taxes on buildings, acres and animals.
Oxen were more valuable than steer, steer more valuable than uncastrated bulls, and so on, said David Cook, a Maine and American history teacher at Central Maine Community College.
Money went to schools, roads and paupers, and stayed local. There was no state aid or funding formula.
“In these little towns the idea was everybody was kind of pulling each other along,” he said. Quaint, but if someone refused to pay, or couldn’t, “they’d auction your stuff off right out from underneath you.”
Property taxes have stayed Maine’s biggest source of tax revenue, accounting for 38 percent of all taxes in 2000, according to the Census.
Sales and income were 28 percent each.
Only six states rely on property taxes more heavily and, in Maine, the burden isn’t blunted.
Thirty-four states allow the use of local-option sales taxes, letting cities and towns raise extra money to offset expenses, according to the National Conference of State Legislatures.
Maine doesn’t.
Some states bill at fractional values, for example, taxing business and commercial development at 100 percent and residential at 50 percent, said Charlie Colgan, professor of public policy and management at the Muskie School of Public Service in the University of Southern Maine.
Maine doesn’t.
Forty-six states try to limit property taxes by curbing assessments or expenses or mill rates, as tracked by NCSL.
Maine doesn’t.
In the 2000 Census comparison, Maine’s state and local property taxes – as a percent of income – are the second heaviest in the country behind New Hampshire.
But that’s an estimate. Some 30 states have contracts with the Census Bureau to provide accurate data, according to St. John.
Maine doesn’t.
Paying for the view
Property taxes are a product of two factors: municipal budget and local value.
Value is the wildcard.
A home’s value isn’t tied to the owner’s consumption or spending or earnings. It’s tied to the real estate market at large.
Buyers have felt flush with low interest rates for the past few years. Half the homes sold in January in Maine fetched more than $163,000. That’s up 50 percent since 2000, according to the Maine State Housing Authority.
By Maine Constitution, property here is assessed at fair market value – what price it would command if a “For Sale” sign went in the ground. So when neighbors’ homes sell high the value of surrounding property bobs up.
Every year the state looks at sales data and local valuations to figure the fair market value of all taxable property in each municipality. (State value effects revenue sharing, county taxes and the education formula, according to David Ledew, supervisor in the Property Tax Division at Maine Revenue Services.)
In the last five years, Rumford lost a little value. Millinocket gained the tiniest bit. Farmington, Lewiston, Auburn and Oxford saw property values increase 16 to 30 percent.
In Poland, Bar Harbor, York, Harrison, Naples, and Lovell – communities with lakes and oceanfront – growth exceeded 58 percent.
“Native Mainers are getting crowded out of coastal Maine,” said Philip Trostel, an associate professor of economics and public policy at the Margaret Chase Center for Public Policy at the University of Maine.
Jack Wibby, a retired Yarmouth school teacher, has devoted himself to promoting a statewide tax-cap referendum.
The value of his modest, two-acre home on Little John Island went from $146,000 to $390,000 after a local valuation. His tax bill jumped 94 percent.
“I like this place very much. I don’t want to leave,” said Wibby. “If you own expensive property you must be rich, it’s implied.”
The property tax system does little to reflect a homeowners’ ability to pay, said Bill Becker, executive director at the Maine Heritage Policy Center, a conservative thinktank.
This winter about 83,000 homeowners and renters applied for property tax relief through the state circuit breaker program, hoping to qualify based on income guidelines.
The maximum benefit is $1,000. Average relief is $384.
Of course value itself wouldn’t be as big an issue if municipalities weren’t also raising more money.
If a town’s budget didn’t increase but all property in town gained value, the mill rate would drop. Everything would even out.
Maine cities and towns in 2003 raised $1.6 billion in local property taxes – that’s up 30 percent in five years. Reasons include more services, higher costs and salaries, and increased spending for education, the main complaint behind the Maine Municipal Association’s referendum on the ballot last fall and making a return later this year.
Strike up the chorus
The average local property tax bill in Maine in 2002 was about $2,039, or 4.2 percent of income here, up just a bit from 1975. (Both burdens look a little heavier than they actually are, cautions Colgan, because commercial and industrial tax bills can’t be removed from the mix.)
Maine enjoyed a prosperity streak up until 2001, the increasing costs of municipal services and rising property values having been, on the whole, offset by growing incomes. But that year income grew by about 5 percent and municipal budgets by 8.6 percent.
Recession hit, real estate got hot and, since then, there has been an amplification in the almost ever-present noise for property tax relief in Maine.
Last year, the Maine Municipal Association, angry at what it sees as the Legislature’s failure to live up to the promise of paying for 55 percent of local K-12 education costs, got its own tax relief proposal on the ballot. The Baldacci administration countered with 1B. Local Republican Bob Stone countered both with 1C.
Because no one plan got more than 50 percent of the vote, the MMA plan is back on the ballot this year.
Meanwhile, Carol Palesky, a Topsham activist, collected enough signatures to get her 1 percent tax cap proposal placed on an upcoming ballot.
The governor, the speaker of the Maine House (a Democrat), Republicans and a private taxpayers’ organization have since revealed their own ideas for property tax reform. There’s talk at the State House of one or two more plans in the works.
Despite all the reform fervor, many Maine residents appear to have gotten used to their property taxes. About 100,000 more homeowners could apply for the state’s homestead exemption, knocking about $125 off their tax bills, according to House Speaker Patrick Colwell.
The circuit breaker program that provides relief for the poorest residents had more applicants in 1989, 1999 and 2000 than it did last year, leading some to suggest the issue has more light than heat.
If not for the MMA proposal there probably wouldn’t be more complaints about property taxes this year than any other, Trostel at UMaine said. “People complain about taxes all the time.”
Added USM’s Colgan: “I don’t think there’s a time in the last 30 years when there wasn’t concern about the property tax.”
So now that it’s gotten so much attention, what to do?
“Reform is hardly ever nice and clean and without pain,” said Wibby. “There’s no change you can suggest that isn’t going to bring a chorus of howls.”
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