01-04-2025
Lawmakers advance plan to expand tax exemption for homeowners
House Minority Leader Billy Bob Faulkingham (R-Winter Harbor) testifies before the Taxation Committee in Augusta. (Photo by Emma Davis/ Maine Morning Star)
After hearing a litany of proposals to expand the state's tax exemption for homeowners, the Legislature's Taxation Committee moved forward with one amended plan that would increase the exemption for all people incrementally.
In a unanimous vote among those present on Tuesday, the committee voted to advance a plan that would increase the Homestead Property Tax Exemption by $5,000 per year until it reaches a total value of $50,000 from the just value of a home over the course of five years.
This plan, which is in LD 140, now heads to the Maine Senate and House of Representatives for approval.
Currently, the Homestead Property Tax Exemption provides a reduction for property tax purposes of up to $25,000 from the value of a home. In order to qualify, a homeowner must be a permanent resident of Maine, the home must be their permanent residence and they have to have owned a home in the state for at least one year before applying.
As originally proposed by Sen. Joseph Baldacci (D-Penobscot), LD 140 would have increased the tax exemption by $10,000 per year until the total exemption reached $95,000. Baldacci argued that incrementally increasing the tax exemption would be the most fiscally responsible method because it will be more feasible for the general fund to absorb costs.
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The committee agreed, though opted for smaller increments and a smaller overall increase.
The smaller increments would now cost the state roughly $14 million per year, compared to double that with the initial proposal, which Rep. Shelley Rudnicki (R-Fairfield) characterized as more reasonable.
The amended bill also removes adjustments for inflation after the cap, which lawmakers argued felt less pertinent due to the gradual adjustments.
'It seems like it just makes it extremely complex for everyone and I'm not sure that most taxpayers would even notice that,' said Rep. Gary Friedman (D-Bar Harbor), who proposed the tweaks.
Gov. Janet Mills' administration testified against LD 140, and the several other proposed reforms to the homestead exemption, arguing it will shift the property tax burden to other taxpayers and result in an increase in property tax mill rates over time.
'LD 140 would provide broad property tax relief to resident homeowners, regardless of their ability to pay the tax, at a very high cost, when more focused tax relief could be provided at a much lower cost using the Property Tax Fairness Credit or other programs,' Michael Allen, associate commissioner for tax policy in the Department of Administrative and Financial Services, told the committee earlier this month.
Last year, lawmakers expanded eligibility to the Property Tax Fairness Credit — which provides refunds for property taxes or rent paid — and created a Property Tax Deferral Program, specifically to soften the blow from the short-lived Property Tax Stabilization Program that allowed older Mainers to freeze their property taxes.
The Legislature repealed that program after just one year in effect, following skyrocketing cost projections, concern about wealthy property owners taking advantage due to a lack of income restrictions and the administrative burden it left on municipalities.
The Taxation Committee is hearing other proposals aimed at controlling property taxes on Wednesday, including legislation to reinstate the Property Tax Stabilization Program and amend the state constitution to require greater state reimbursement for residential property tax exemptions and increase the minimum homestead exemption to $50,000.
Bipartisan efforts to expand property tax exemptions face pushback from Mills administration
While advancing Baldacci's proposal, the committee voted Tuesday against four other proposals to expand the homestead exemption in other ways, including through one lump increase or only for particular groups.
These rejected proposals included LD 658, sponsored by House Minority Leader Billy Bob Faulkingham (R-Winter Harbor), which would double the exemption from $25,000 to $50,000 of the just value of a home.
Two had focused specifically on residents who are 65 years old or older. LD 7, sponsored by Sen. Rick Bennett (R-Oxford), proposes increasing the exemption to $75,000 for that group, while LD 934, sponsored by Rep. Stephen Wood (R-Greene), proposed a greater exemption amount for that group, as well as veterans.
LD 570, sponsored by Sen. Cameron Reny (D-Lincoln), would provide an additional tax exemption of $75,000 to families and individuals who make below a certain income, bringing the total tax exemption available for those eligible up to $100,000.
The votes against these other plans were also unanimous among those present.
The committee has yet to take action on LD 559, sponsored by Sen. Donna Bailey (D-York), which would allow municipalities to adopt a property tax stabilization program for their senior residents approved by local ordinance.
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