AUGUSTA — Lawmakers seeking to minimize state cuts to funding for local municipalities said they are looking at various tax credits and incentives as a potential source of revenue.

State Rep. Thom Watson, D-Bath, the chairman of the Taxation Committee, said certain business tax breaks may not be providing the level of economic development that they were intended to during a meeting of members of the Appropriations Committee last Friday .

Watson said his committee would like to mitigate the cuts to municipal revenue sharing that have been proposed by Gov. John Baldacci because they fear it will result in increased property taxes.

“When the cuts we make just merely shift the burden to a different tax system, that bothers us,” he said. “It’s disingenuous to say we’re doing a great job here, we’re saving all this money, when in fact all it means is that I’m going to see my property taxes go up.”

Watson said the Taxation Committee is scheduled to hold a public hearing at 10 a.m. Wednesday to discuss changes to economic development tax credits, imposing service charges on certain tax-exempt entities and reviewing mandates imposed on municipalities.

“If we convince ourselves these programs are working, we’ll leave them in place. If we think that due to lack of transparency or lack of accountability, lack of attention, frankly, they are being funded, but not producing the kind of economic development and growth that they were intended to, then it may be opportune to take that money and spend it elsewhere in this tight budget,” he said. “There are a number of what’s called business tax expenditures, which are breaks primarily for businesses, often for nonprofits. They’ve been on the books for years; they are very expensive.”

State Rep. Sawin Millett of Waterford, the senior Republican on the Appropriations Committee, said he shares concerns about the $27 million in proposed municipal revenue sharing cuts.

“They are looking at four or five different alternatives, including attempting to remove the tax-exempt status from nonprofits that engage in gambling, doing some expansion in the area of allowing tax-exempt properties to be subject to local taxation, and those ideas are good,” he said. “We share the concern that municipalities need more tools to absorb any cuts that we impose on them from Augusta, and that we try to give them as much budget flexibility, both in the long-term planning sense and in the timing sense, of some of the cuts that are being passed down.”

The effectiveness of tax cuts aimed at economic development has been notoriously hard to quantify, said State Rep. Peggy Rotundo, D-Lewiston, also a member of the Appropriations Committee.

“It was probably five years ago when I initially put something in the budget to require that we start looking at the whole issue,” she said. “Then (the Office of Program Evaluation & Government Accountability) did a study, and then an independent consultant did a study. Now here we are with money being spent on these studies, and we still don’t have a clear sense on the effectiveness of these programs.”

Watson said he was optimistic his committee would find some savings that would help soften cuts to municipalities, but he wasn’t sure how bipartisan the solution would ultimately be.

“When the rubber meets the road and actual programs are posed for reductions, that’s when we’ll find out where we are,” he said. “So far, we’ve had a very bipartisan approach to the discussions; everything has been on the table. We’re good at discussing things that way, but when it comes to actually voting that’s when party tends to take hold.”

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