PORTLAND, Maine — After 26 years living in the West End, Stephen Small is selling his modest home. The main culprit is rising property taxes.
The 71-year-old Small and his wife bought their home on Summer Street in the 1990s for $111,500. Taxes were manageable on his income as a physical therapist, but two revaluations pushed their home value up to $775,000 by 2021.
Small, who is now retired and lives on Social Security, was able to negotiate that down by writing to the city assessor with a list of his home’s deficiencies: The foundation isn’t sound, and it needs new siding and windows. Yet his tax bill is still more than $7,000 a year.
“It was just nightmarish,” Small said. “It’s very discouraging to someone in my income bracket who wants to live in a place like this.”
Small isn’t alone in struggling to stay afloat. Maine has one of the highest property tax burdens in the nation. Over the past few years, property values have skyrocketed. Cities and towns have struggled to contain municipal and school costs, and many are catching up on long-deferred revaluations. Those factors conspire to hit people who live in increasingly desirable areas.
While those high property values are a boon for homeowners who want to sell, tax increases hammer those who stay and get passed on to renters. Matthew Daigle, who owns a 3-unit Westbrook building that his family lives in, has long offered rentals below market rate. After an $1,800 tax increase within two years, he can’t do that anymore.
“It’s not something I can swallow completely by myself,” Daigle, 48, said.
Maine cities and towns took in nearly $3 billion in property taxes in 2022, with the state estimating that state residents pay slightly less than half of that. That total was up from $2.1 billion a decade earlier. It falls harder on lower-income taxpayers. Three years ago, the bottom 20 percent paid 5.3 percent of income to just 0.7 percent for Maine’s wealthiest 1 percent.
Municipal budgets have increased sharply in many Maine cities and towns in the last few years, driven by the inflated costs of goods and services and wage increases. That is the major factor driving tax hikes, noted Garnett Robinson, owner of Maine Assessment & Appraisal Services Inc. of Dixmont, which conducts assessments for several cities and towns.
Tax rates are typically lowered when property values rise. That’s why property taxes drop or stay the same for many when cities conduct revaluations — when cities and towns survey properties to update their taxable values. But undervalued properties in hot areas like Small’s home on Portland’s West End can see sharp increases, as a city document on the topic explains.
Yet lots of Maine cities and towns are playing catch-up on that front. Bangor is on the cusp of its first revaluation in a staggering 37 years. Many municipalities have delayed revaluations along with other local projects because they are expensive, said Kate Dufour, a lobbyist with the Maine Municipal Association.
“We pay our schools and county bills first before we start really thinking about what’s left for the municipal budget,” she said.
State policymakers have long tried to contain property taxes through various programs, including a mandate to fund 55 percent of basic K-12 education costs, sharing 5 percent of income and sales tax revenues with cities and towns, the Homestead Exemption and a more recent Property Tax Fairness Credit that is based on income limits.
That latter program was beefed up by lawmakers after the repeal of a property tax freeze program that ran for one year before the Democratic-led Legislature repealed it in 2023 because costs would have exploded as time went on.
Elected officials are considering new property tax initiatives. Rep. Joe Perry, D-Bangor, the co-chair of the Legislature’s tax committee, backs raising revenue sharing to 7 percent and offsetting the change by doubling the Homestead Exemption to $50,000 while not matching it with state funds. The result would be to shift tax burdens from primary homes to other property.
There’s “not enough money in the state of Maine” to put additional state money into education, revenue sharing and General Assistance, Perry said. That would take a federal investment, and pandemic-era federal funding has essentially dried up in Maine by now.
“You know the budgets are going to track inflation, but it’s exaggerated because of the labor shortage,” Perry said. “Municipalities can’t hire firefighters, police officers, bus drivers. One of the ways you attract people to those jobs is with higher wages.”
Republicans are suggesting that their message will be that cities and towns need to tighten their belts. Rep. Laurel Libby of Auburn, a leader of the party’s conservative wing and a tax panel member, said: “The No. 1 solution is for government to cut spending.”
“Our municipal budget is growing by a far greater percentage than the everyday Mainer’s household budget,” she said. “That’s just unsustainable. We have to cut back.”
