Two weeks ago, I wrote about the need to strengthen Maine’s Circuit Breaker Program, which provides tax relief for about 88,600 Maine taxpayers.  In the blog, I discussed the need to defeat two bills, LD 1680 and LD 1693, because they would impose additional, burdensome requirements on applicants.  Those bills were up for public hearing today by the Taxation Committee.

Today’s blog post highlights the Circuit Breaker Program’s benefits.  By refunding money to eligible low, moderate, and middle income taxpayers, the Circuit Breaker Program achieves two important goals.

First, the refunds generate economic activity because money that is refunded is likely spent in the local economy.  The nearly $42 million in refunds issued in program year 2010 generated economic activity across a variety of sectors, including $8.4 million in health care, $7.3 million in housing, $3.9 million in retail, and $1 million in private education.   Additionally, the $42 million in refunds helped support $13 million in employee compensation.

As one claimant testified, “This refund has made a big, big difference, especially this year.  When all you’re living on is Social Security, this kind of assistance keeps me in my home.  It would take 4 months of my Social Security to pay my property taxes.”  

Second, the Circuit Breaker Program reduces property tax burdens for those who pay a disproportionately high percentage of their income in property taxes.  This has the effect of lessening the regressive nature of the property tax.  In 2009, before factoring in the Circuit Breaker benefit the bottom 20% of Maine taxpayers paid 8.34% of their income in property taxes while the top 10% paid only 3.05%.  For those in the bottom 20%, the Circuit Breaker Program reduced their effective individual property tax rate by .95%, almost a full percentage point.

It is also noteworthy that the Circuit Breaker is more effective at reducing effective tax rates for the bottom 50% of Maine taxpayers than the Homestead exemption.

Let’s strengthen, not decimate, the Circuit Breaker Program.