AUGUSTA, Maine — Maine’s sweeping property tax freeze program for seniors would go away under a budget compromise, and lawmakers have rallied around a plan targeted at low-income seniors to replace it.
The spending deal advanced by Democrats and Republicans on the Legislature’s budget committee will go to the full Legislature for votes later this week. While some conservatives may hold out on the plan, it likely will pass and Gov. Janet Mills has said she will sign it.
That would mean the popular freeze with few strings attached will only be in effect for a year. The replacement plan builds on other state programs in a way that will take benefits away from many, provide larger benefits to fewer people and keep costs far lower over time.
Here’s what you need to know about the change.
The new program gives low-income seniors bigger benefits.
Maine’s tax-freeze program is novel. All Mainers 65 and older qualify if they have owned a home qualifying for a homestead exemption for at least 10 years. They could apply annually to have taxes frozen at the previous year’s level, and those frozen payments could even be transferred between towns if the person moved into a higher-priced home or area.
The program was popular. An estimated 100,000 Mainers applied in the first year, according to the Maine Municipal Association. The replacement plan, contained in a heavily amended bill from Sen. Rick Bennett, R-Oxford, will wind it down after a year and target new benefits.
It does that by souping up two existing programs. The major one is the Property Tax Fairness Credit, which currently allows eligible to take a $1,500 credit. The package increases that to $2,000, and it also loosens limits on the program in a way that allows the benefits to remain constant for a Mainer whose spouse dies.
It also expands a smaller loan program in which the state pays property taxes for seniors who cannot. Taxes must be paid back when the home is sold or becomes part of an estate. It doubles the income limit on that program to $80,000 and also raises asset limits.
It eliminates costs that were set to multiply each year.
These changes have a big effect on public finances. Stewart was able to pass his bill because only the startup costs were needed to get it going. But costs were set to rise exponentially under the program because of Maine’s aging population and the ever-increasing gap between frozen and real property valuations.
For example, Mills allocated $15 million for the program in the first year and $31 million for the second year in a budget proposal. The cost would have kept rising.
Instead, lawmakers settled on a package of changes that will remain relatively stable. The fairness credit changes are expected to cost $29 million in the first year, only increasing slightly going forward. The deferral program is designed to be self-sustaining, so only $1.5 million is needed for those changes.
Some Republicans may oppose the change, but leaders are on board.
You can’t separate the tax freeze program from the odd way it was passed. Sen. Trey Stewart, R-Presque Isle, introduced the idea two years ago. It then sat on a shelf for a year. Senate Republicans were able to revive it using money left for them in a budget deal, and Mills allowed it to pass without her signature in her reelection year of 2022.
Municipalities have mostly criticized the program for its design, saying it does not hew to the way property taxes are tracked by towns and between them. The Maine Municipal Association has been leading the charge to get rid of it, working through House Majority Leader Maureen Terry, D-Gorham, to propose a larger homestead exemption for low-income seniors.
Stewart was arguing for his law earlier this year, saying it should be allowed to play out for a few years with tweaks if needed. But Democrats and Republicans moved forward with their different approaches, and the tax and appropriations committees settled on the new Bennett bill.
Some Republicans argued against the approach in the tax panel, but it seems likely to advance. Finding a replacement this year was key, since the political costs of taking back the wider benefits would grow over time, Kate Dufour, a municipal association lobbyist, said. But she thinks the policy here is better as well, targeting bigger benefits to those in need.
“We’re talking about $2,000 that’s available today or whenever to heat your home,” she said.
