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Sunday, October 26, 2003
Property-tax burden distributed unevenly
Copyright © 2003 Blethen Maine Newspapers Inc. | ||||||||||||||||||
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WARREN — Barbara Young breathed a sigh of relief last month when she opened her property tax bill from the town of Warren. "I thought it was going to go up, but it went down this year," said Young, who benefited from a townwide revaluation that shifted more of the town's tax burden onto owners of lakeshore property. She and her husband, Sherwood Young, also benefit from living in a town that is small enough to function with a no-frills government. If they lived in a similar house in a regional hub, like Waterville, their property tax bill would be more than 75 percent higher. Two referendum questions on the Nov. 4 ballot have focused public attention on what some describe as Maine's property tax rebellion. But an examination of full-value tax rates around Maine shows that property taxes are not a hardship for many communities and families. Rather, the tax burden in Maine is unevenly distributed. It falls most heavily on homeowners who have modest incomes and are living in Maine's cities and regional hubs, and also on moderate-income families whose properties are rapidly rising in value. Some policy makers say the data supports the notion that the state should target tax relief to the people who need it most, and that the state needs to find a way to help the taxpayers of Maine's cities, both large and small, that support the services that benefit an entire region. Of course, the people who have it easy when it comes to property taxes are not likely to show up at legislative hearings. For them, the system works fine. The taxes that pay for services in their communities are largely paid by someone else. Mill towns, like Skowhegan and Woodland, do all right because the mill owners pay the bulk of the taxes. Towns that do better have lakefront property, like Casco, which in 2001 had a full-value tax rate of $12.47 per $1,000 of value - half the rate of Waterville. Because cities and towns revaluate properties at different times, it's difficult to compare tax rates. The Maine Revenue Service calculates "full value" tax rates by using state estimates of market values. The most recent year for which full-value tax rates are available is 2001. Using the full-value calculation, it's easy to see spot the winners and losers in Maine's tax system. Resort communities are among the winners. Carrabassett Valley, site of the Sugarloaf ski area, had a full-value tax rate of $6.59. Other winners are people who live in unorganized territories, where the state picks up the tab for educating their children, and those who live in upscale coastal towns. Kennebunkport, Mount Desert, Harpswell, Ogunquit and Castine all have tax rates below $9 per $1,000 of value. In these towns, the people who have homes on the water get the big tax bills, while families in modest homes inland enjoy the benefits of having the lowest tax rates in Maine. Several communities in southern Maine - Portland, South Portland, Bath and Yarmouth - have the worst of both worlds. They have relatively high property values and high tax rates. The biggest losers, though, are the people who live in cities and regional hubs in interior Maine - places like Augusta, Lewiston, Auburn, Presque Island, Isle, Orono and Waterville. In 2001, all had full-value tax rates higher than $24 per $1,000 of value. The bedroom communities surrounding these regional hubs all had lower taxes, sometimes significantly lower. The community with the highest tax rate is Mexico, which has the dense population of a mill town, but no mill. The mill is located across the river in Rumford. Mexico's tax rate was $27.18, while Rumford's was $18.49. But property tax can burden some families even in towns with low tax rates. Take the Lank family in Kennebunk. Although the town has a low tax rate of $10.90, the Lanks own a 223-acre of farm which that the town recently valued at $1.4 million. JoAnn Lank and the late Jim Lank earned only about $35,000 last year, and their tax bill is around $15,000. Their son, Robert Lank, who made even less money as a logger, will some day inherit the farm. The property includes hayfields, a Christmas tree farm and a dilapidated sawmill that produced lumber for lobster traps before wire traps took over. Taxes are pushing the Lanks off the land, which has been in the family for a century, Robert Lank said. "We find we can't live the life we want to live," he said. The state has programs to help people pay their taxes, although many people don't take advantage of them. Lank could save the farm if he puts it in a state program that allows farm land to be taxed for its agricultural value rather than its value as house lots. He would have to pay a tax penalty if he were to sell the land for development. Lank said he's thinking about joining the program. The state also has a way to help homeowners who pay a high percentage of their income for property taxes. It's called the state's Property Tax and Rent Refund Program, also know as the "circuit breaker." People have to apply for it, and many Maine residents either do not know about the program or assume they do not qualify, according to state officials. Currently, homeowners who meet income limits and devote more than 4 percent of their income to property taxes are eligible for up to $1,000 of in relief on a graduated scale. Question 1B on the Nov. 4 ballot would expand the program. It increases the income limits and the size of the rebate check. After a three-year, phase-in period, a family earning up to $75,000 may qualify for up to $2,000 in relief. The Kessler-Fischer family in Portland, for example, who earned less than $38,000 last year, are is looking at a $3,137 tax bill for their four-bedroom home on Longfellow Street. However, they qualify for an $862 state refund. If voters approved Question 1B and their the family's income and tax bill remained the same in 2006, they would qualify for $1,014. In addition, the city of Portland has developed its own property-tax rebate program. The controversial program this year provides $402 to every homeowner in the city, but commercial property owners won't benefit. Rather, they will feel the full brunt of a 4.2 percent increase in a tax that otherwise would have risen less than 1 percent. With the Legislature so far unwilling to lighten the tax burden of homeowners in service centers, Portland's rebate program is something the city can do now to help, said Portland Mayor Jim Cloutier. The two programs combined lower the Kessler-Fischer family's tax bill by 60 percent. Jim Kessler, though, worries that it could unfairly hurt businesses and cause some to move to the suburbs. "It's a feel-good issue for a year," he said, "and long-term, it kills the city." He said he'd rather see an expanded state rebate program. But the program won't help more affluent families who are living in high-tax places, like the Barnard family in Waterville. In 2001, that community had the sixth-highest full-value tax rate in Maine. The Barnards will pay about $2,500 in property taxes for their Victorian home, assessed at less than $100,000. The family's income is $65,920, too high to qualify for the current state rebate program, which has an income threshold of $46,300. The proposed expansion in Question 1B would increase the threshold to $75,000, but to qualify the Barnards would have to see their taxes climb a little higher, to $2,637. Since the Barnards moved to Waterville 17 years ago, property taxes have risen steadily while city services have been reduced, said Bruce Barnard, who works at Colby College and serves on the city planning board. City taxpayers maintain the urban infrastructure that serves the shoppers and commuters who live in the region, he said, yet the city's own tax base has been undercut because nonprofit institutions - like the college - don't pay property taxes, and the city has given tax breaks to new businesses, such as Wal-Mart. Waterville is increasingly populated by senior citizens and poor people, he said, and the middle class is moving to bedroom communities, where they pay taxes are significantly lower taxes. For example, if the Barnard home could be relocated to nearby Belgrade, its property taxes would be cut in half. Yet people who live in Belgrade take advantage of all the businesses and nonprofit institutions located in Waterville, Barnard said, and they don't have to pay a dime. "A lot of them work here, shop here, come here for restaurants and entertainment," he said. "But we have to support that." Staff Writer Tom Bell can be contacted at 791-6369 or at: YOUR BURDEN
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