AUGUSTA — Eliminating any of the state’s tax exemptions and credits will be politically challenging but may be necessary to avoid further cuts to municipal revenue sharing, Maine lawmakers said Monday.

A special group of lawmakers, state officials and economists that’s been tasked with examining the state’s tax breaks, exemptions and credits to come up with $40 million in savings in the state budget met Monday for the first time.

Republican Sen. Roger Katz of Augusta said repealing any tax exemptions won’t be easy because people, businesses and organizations at one point made the case for why they are necessary.

But the group’s failure to come up with the savings will mean an automatic reduction to municipal revenue sharing, which has already been reduced by $75 million, a move that has been harshly criticized by cities and towns.

“I think most of us agree (that) would be very damaging to municipal governments, so I think we will be motivated to do it,” Katz said.

The group, which is expected to meet several times this fall before reporting back to the Legislature in December, is also attempting to come up with a process to regularly review the effectiveness of the various tax exemptions on the books.

Democratic Sen. Anne Haskell of Portland said she’s hopeful that the group will be able to find that several exemptions are outdated or ineffective, which won’t be too damaging to businesses or residents to eliminate.

“I’m hoping that our committee will find that there are some where we don’t know what the benefit has been or we are able to say the benefit has not matched what the original intent was,” she said.

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