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A Joint Project of the Maine
Association of Interdependent Neighborhoods |
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Volume 9 No. 1 |
February 2005 |
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MAIN
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A Joint Project of the Maine
Association of Interdependent Neighborhoods |
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Volume 9 No. 1 |
February 2005 |
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Legislature Enacts Property Tax Reform:
What Does it Mean for Low-Income Families?After months of debate, two hotly contested referendum votes, and an unusually fast-paced start to the legislative session, we finally have a new law aimed at reducing the high cost of property taxes faced by some Maine families. LD 1, proposed by the Governor and amended by a special Property Tax Reform Committee, was passed by the legislature on January 20th. This law will help many low-income families. But the law also includes a new cap on State spending that may harm those needing State services like health care, child care or education and training.
MAIN worked on two issues in LD 1 that will affect low-income people: increases in the circuit breaker program and government spending caps.Increases to the Circuit-Breaker Program:
Rent & Property Tax ReliefThe Maine Rent and Property Tax Relief program is also known as the “circuit breaker” program. This program gives cash back to people with low incomes who have high property taxes or rent. MAIN wanted to make sure that any increases to this program would help those with the greatest need. The final bill does not give low-income people as much help as MAIN wanted but will still give some support.
The program will give more assistance to renters, whose rent is also affected by high property taxes;
The maximum program benefit will increase from $1,000 to $2,000 a year depending on the household's rent or property tax in relation to their income.
Here is how the Circuit Breaker program works. It reimburses those eligible for that portion of their property tax that equals more than 8% of their income, and for 50% of their taxes that equal between 4% and 8% of their income. The maximum benefit is $2,000 per year. Renters are reimbursed using the same formula, with 20% of their annual rent being counted as their “property tax.”
Here are two examples of how this new law will help low-income families:
Ann and Larry live with their two children in a home that they own. They earn $18,000 a year and their property tax is $2,200. Their Circuit Breaker benefit will be $1,120. Before the passage of LD1, their benefit was capped at $1,000. Their family will now receive $120 more because LD 1 raised the maximum cap to $2,000.
Mary and her two daughters rent an apartment for $500 a month. Mary's income is $8,000 a year. Their new circuit breaker benefit will be $720. Before the passage of LD 1, their benefit would have been $600.
As things stand now, property owners and renters will be able to apply for the new circuit breaker program starting in late summer or early fall 2005.
I rely on the Circuit Breaker program to reduce my property tax by a considerable amount. It allows me to remain a homeowner and raise my son, who has special needs, in a safe and stable environment. Property tax relief should be targeted to people who most need it, and not be funded by reducing other vital services. Sandy, Orono
New spending caps at all levels of governmentLD 1 caps the annual spending of state, county and municipal governments. Under the State cap, spending cannot grow faster than the increase in per capita income plus the increase in the population over a ten-year average. This rate is estimated to be about 3.14% for state fiscal year 2006-in other words, state spending cannot increase more than 3.14% between 2005 and 2006. A majority vote of the state legislature would be needed to override this spending cap. Since they just passed this law, we don't think they would try to override it anytime soon.
MAIN has several concerns about this spending cap:
Spending caps set an arbitrary limit on the amount of growth in government spending regardless of current needs within the state.
Even if more funds become available, as is expected in our improving economy, or if the state generates new revenue sources, we must still keep spending below the cap.
Some of the most critical government programs are growing at a rate higher than the spending caps. For example, growth in MaineCare is greater than the cap because health care costs generally are higher and because more people are being served in an effort to reduce the number of uninsured in Maine.
Spending caps often cause cuts in existing programs to pay for any new programs. This prevents an increase in overall spending.
MAIN members can be pleased that there will be an increase in aid from the circuit breaker program that will help low-income people. But we will all have to watch carefully to make sure that new spending caps do not cause cuts in the critical programs that many Maine people depend on.
