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LD 290, An Act To Stabilize Property Taxes for Individuals 65 Years of Age or Older Who Own a Homestead for at Least 10 Years, is poorly crafted legislation and ought to be repealed.
Consider the frustration introduced by LD 290 into a municipality’s annual budget cycle:
Presuming no tax stabilization, property tax bills for the coming fiscal year are determined in the usual fashion.
Revenue lost from stabilized tax bills can then be determined. The municipality applies to the state in November for reimbursement of this lost tax revenue, to be paid the following January. So far, so good.
Then comes the “gotcha”: The municipality can count on only 50 percent reimbursement, as mandated by the Maine Constitution. As the enormous cost of LD 290 reimbursements emerges, the Legislature is unlikely to be able to fund much, if anything, more than 50 percent.
A prudent municipality now starts all over again at step one, this time adding to its budget a contingency fund to cover any lost property tax revenue not reimbursed by the Legislature.
As with all tax breaks granted to a subset of taxpayers, a tax burden shifts from those favored to those excluded. LD 290 shifts a portion of property taxes from seniors who meet eligibility criteria to the remaining property taxpayers of the municipality or, in the case of any legislative reimbursement, to payers of state income tax. There are Mainers for whom property taxes are a genuine economic hardship, and few among more fortunate taxpayers object to sharing around the cost of relief from such burden. Unfortunately, LD 290 grants property tax relief indiscriminately to a broad class of seniors with no means testing for eligibility. Having done so meets no reasonable test of equity or fairness.
Sensible alternative legislation has been proposed by which to grant a means-tested supplemental homestead exemption to individuals over age 65 who have owned and resided in a taxable homestead in Maine for at least 10 years. This approach stabilizes taxable property valuations instead of tax revenue, which allows the usual municipal budget cycle to operate, just as it does with existing homestead exemptions.