BNN Tax Snacks: Maine’s New Property Tax Stabilization Program Is . . . Destabilized

A year ago we shared news of a new program in Maine that permanently froze property taxes assessed on the principal residence for many Maine homeowners – residents aged 65 and older who met certain other criteria. Each year, residents would need to reapply to keep the tax level frozen.

As we shared in an earlier article, the legislative committee charged with vetting last year’s proposed legislation concluded that the stabilization program “ought not to pass” (that was the committee’s formal recommendation to the full state legislature). Lawmakers ignored that recommendation and passed it anyway. Now, just a year later, they have come around to the committee’s way of thinking and ended the program.

Those who successfully applied late last year for the tax freeze will receive their one-year’s worth of frozen taxes. However, no one can renew for another year and no one can send in a new application. In its place, Maine’s lawmakers expanded two existing programs:

  1. One enhances a deferral of real estate tax for seniors, allowing qualifying individuals (based on income and asset limits, both of which have been increased to allow greater participation) to sidestep current payment of real estate tax. Under this relatively unknown provision, the state will cover the costs, recouping those costs from the senior’s estate or from proceeds of the sale of the home if sold during the senior’s life.
  2. The other program is the Property Tax Fairness Credit, which provides a reduction of income tax for residents whose real estate tax is high relative to their incomes. (In some cases, it can not only reduce otherwise-payable income taxes, but can produce a net refund – a payment to the participant – even if that individual incurred no income taxes to offset.) The maximum benefit has increased from $1,500 to $2,000.

One of the biggest complaints with the short-lived stabilization program is that it imposed a significant and confusing filing burden on every municipality in the state, as well as a funding hole in those municipal coffers to be reimbursed later by the state, after it was satisfied with the blizzard of paperwork it imposed on those towns. Both of these program expansions that replace the stabilization program place the administration and funding solely on the state, leaving the municipalities, as they no doubt prefer, out of it.