Maine’s tax burden is high, ranking fourth after New York, Hawaii and Vermont. The state, however, is attractive to wealthy non-residents who reside in low-tax states. They have a second home in Maine, spend just under six months of the year in the state, and avoid most of the taxes that are incumbent on full-time residents. These out-of-state residents reap many of Maine’s benefits, but do not support the state budget the way residents do.
Consider homeowners out of the state of Maine residing in Florida and Texas, states with no income tax. How do they profit and compromise the full time residents of Maine?
Out-of-state homeowners are pushing up real estate prices, making affordable housing inaccessible to many residents, forcing some to take long journeys and others to simply leave the state, depriving the Maine for its human capital and essential workers. These out-of-state homeowners, who can spend just under six months in Maine with their homes empty for the rest of the year, do not pay Maine income tax and do not pay no income tax in their state of residence of Texas or Florida. These out-of-state homeowners also avoid the high Maine estate (death) tax. Florida and Texas do not have an estate tax while Maine has a tax rate of between 8% and 12% on estates over $ 5.6 million.
When you put it all together, we find that the wealthy non-resident Maine landlords are courting the state and the people of Maine. They avoid income and inheritance taxes that can run into the millions of dollars over their lifetime and upon death. This in turn forces the state of Maine to impose higher taxes on its full-time residents, making the state less attractive to potential newcomers. In other words, if those out-of-state homeowners paid more taxes in Maine, full-time Maine residents would pay less, and the state would be more attractive to younger newcomers.
Are there good options for state and local jurisdictions to collect more taxes from out-of-state homeowners and reduce the tax burden on full-time residents of Maine?
There is a ready-made option for local jurisdictions – the homestead exemption. Local municipalities already have a homestead exemption on their books for full-time residents, but it’s usually minimal compared to the total property tax bill. If the state drastically increased the family property exemption, municipal governments would increase the property tax rate to maintain overall tax collection unchanged. This would provide full-time resident owners with significant tax relief while increasing taxes on foreigners. Such an initiative could be immediately implemented without effective legal challenge.
For the collection of income tax, the state could impose an income tax on people with a second home in Maine, on their annual income in proportion to the number of days of the year they are in their home. Maine residence. While such a tax could be justified on a basis similar to a suburban tax, in effect in New York and elsewhere, it would likely be challenged in court with the end result in question. Non-residents receive services from the jurisdictions where they live. Therefore, they should be asked to pay their fair share of the costs of these services through income tax.
The heavy tax burden is a dark cloud over the future of Maine. Between 2010 and 2020, Maine’s population grew 2.6%, well below US population growth of 7.4%. Maine has the oldest median age of any state. It’s time for Maine to act to lower taxes for residents, make housing more affordable, and in so doing, attract younger residents to the state who pay income tax.
– Special to the Press Herald