AUGUSTA, Maine — As Maine Democrats and Republicans struggle to agree on how to find $40 million in savings in the state budget by reducing or eliminating tax cuts or breaks, Maine's cities and towns are bracing for potential cuts to municipal revenue sharing.
A task force that sought to find the savings in the tax code presented its recommendations to lawmakers Thursday, but they've already drawn criticism from Republicans and Democrats alike, signaling the difficulty the two parties will face as they seek to come to an agreement in the coming months.
The recommendations include limiting tax credits for the restoration of historic buildings and cutting a tax reimbursement program aimed at encouraging Maine businesses to hire new employees. Others proposals would eliminate a local property tax reimbursement program for some retail stores and find ways to tax the purchase of online video and audio streaming.
Maine's cities and towns fear the state won't be able to meet its task, which would result in an automatic $40 million reduction in municipal revenue sharing, almost entirely gutting the program, said Geoff Herman, director of state and federal relations for the Maine Municipal Association.
"It was kind of a Herculean task anyway. People who gave Hercules his tasks didn't expect him to do them. And it seemed like this was almost set up like that," he said. Not only does the committee have to pass the proposals, but the entire Democratic-controlled Legislature has to as well, he added.
Maine's municipalities typically received 5 percent of all state sales and income tax revenue, or about $145 million. But about $73 million was cut this fiscal year and about $83 million the next. The result has been — and will continue to be if further cuts go through — increased property taxes, Herman said.
In a letter to the co-chairs of the Appropriations Committee, a group of House Democrats said they had "deep concerns" with the recommendations and the fact that the process could result in further revenue sharing cuts. They're calling on the committee to focus its attention on scaling back tax breaks for large corporations, breaks for banks on portfolio management and getting rid of tricks that let large out-of-state firms pay less in taxes.
"Their recommendations are strong, but they need to make sure they look at it closely and dig deep," said Democratic Rep. Lori Fowle of Vassalboro. "That's our stance ... that they're looking at this as hard as they can to find the $40 million and not turning back and saying, 'I guess we'll have to go into revenue sharing.'"
Republicans, meanwhile, have attacked Democrats for refusing to look at ways to cut spending instead. They say that the task force was supposed to focus on identifying credits that are no longer effective, but instead are proposing new taxes on students and small businesses.
"The task force needs to go back to the drawing board and Democrats need to come forward with their ideas to reduce state spending or else our budget will be out of balance," Republican Rep. Ken Fredette of Newport said in a statement.
Democratic Rep. Peggy Rotundo of Lewiston, co-chair of the budget-writing committee, said that members will review the recommendations when they return in January and determine the best way to move forward.
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