AUGUSTA — The Legislature’s Taxation Committee heard several bills Tuesday that would increase the portion of a homeowner’s property value that would be exempt from local taxes.

Some of the bills would apply only to homeowners age 75 or older, and all the measures would require the state to make up all or most of the tax revenue lost to municipalities through the homestead exemption increase.

The most aggressive bill, sponsored by Sen. Matthew Pouliot, R-Augusta, would allow a homeowner to exempt the first $50,000 of a primary home’s value from property taxes, with no age limit. The current exemption is $20,000 for a primary residence, with no age limit. Pouliot’s bill would also require the state to reimburse a municipality for the full amount it would lose from the exemption.

In a town where the property tax rate is $15 per $1,000 of assessed value, for example, a homeowner now receiving a $300 annual property tax reduction would see that increase to $750.

“Homeowners across the state who are trying to make ends meet, particularly the elderly who are on fixed incomes, are seeing more and more of their dollars going to pay for property taxes,” Pouliot said.

Other bills offer smaller increases in exemption – from $25,000 to $40,000 – and the percentage the state would reimburse to municipalities varies.

Sen. Nate Libby, D-Lewiston, offered a measure that would phase in a $40,000 homestead exemption in two steps, – an increase to $30,000 in 2020, and to $40,000 in 2021. Libby’s bill would also increase the state reimbursement from 62.5 percent to 75 percent. The reimbursement rate increase would cost the state $83.4 million in 2020 and $95.1 million in 2023, according to the Legislature’s Office of Fiscal and Program Review.

No estimate of the state’s cost had been calculated for the other bills discussed Tuesday.

The debate led to a discussion of whether the Legislature should also increase the amount of revenue sharing with municipalities, which is the subject of other legislation.

Lawmakers are considering increasing revenue sharing with communities from the current 2 percent of tax revenue to 2.5 percent in 2020 and 3 percent in 2021, under the next two-year state budget proposed by Gov. Janet Mills, a Democrat. Mills’ predecessor, Republican Gov. Paul LePage had asked lawmakers to do away with revenue sharing entirely while limiting homestead exemptions to homeowners age 65 or older. 

That change, which the Legislature rejected, would have cut an estimated 213,000 property owners from the program in Maine.

Libby said the homestead exemption is important because it gives Mainers direct property tax relief.

“Compared to, say, revenue sharing, for example, nonresident vacation homes on the coast can benefit from revenue sharing, where the homestead exemption really focuses that property tax relief to residents that call Maine their home for 12 months of the year,” Libby said. “This bill provides more relief to both Maine residents and Maine municipalities.”

To be eligible for the homestead exemption, homeowners must have lived in their primary Maine residence for at least 12 months.

There are 305,000 households in Maine getting the homestead exemption, said Libby, citing figures from the Legislature’s Office of Program and Fiscal Review.

But several lawmakers noted that the state only covers 62.5 percent of the revenue that cities and towns lose to the existing exemption. Other business and residential property owners cover those lost revenues through higher property tax rates.

Kate Dufour, a lobbyist for the Maine Municipal Association, which represents municipalities, said the association supports the bills that include a full reimbursement for cities and towns, but opposes those that would limit any exemption increase to residents over a certain age.

The association supports a bill sponsored by Rep. Betty Austin, D-Skowhegan, that would increase the exemption from $20,000 to $25,000 and require a minimum property tax payment of $100, while fully reimbursing cities and towns for the lost revenue. Dufour said the small increase is more realistic and financially feasible for the Legislature.

Dufour said even with an exemption of $20,000, many homes in Maine pay no property taxes and bumping that exemption to $40,000 or $50,000 would only expand that number, leaving municipalities with fewer resources to pay for police, fire and other services.

“A homestead exemption that is not 100 percent state-reimbursed does not have the impact that it should have,” Dufour said. “What it does is it shifts burdens, not only to non-homesteaders but also to the homesteaders themselves.”

Dufour said it is also important to recognize that not all cities and towns have a good mix of commercial, industrial and residential properties and that “pure bedroom communities … are fully funding their own exemptions.”

She also said eligibility for the program should not be based on age alone.

“We are not convinced that age has a direct impact on the ability to pay,” Dufour said. “There are very old people who are incredibly wealthy, there are young people who are incredibly poor.” She said the Legislature should base the exemption on income or earnings rather than age alone.

A work session will be held before the committee later this month, where the bills could be amended before facing additional votes in the House and Senate.

Scott Thistle can be contacted at 791-6330 or at:

[email protected]

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