Economic development subsidies have long been controversial in Maine. For many years the debate centered on the Business Equipment Tax Reimbursement (BETR) program, which allows companies to recoup property tax payments and which benefited National Semiconductor when it expanded its operations in the state in the mid-1990s (see below). In 1998, a classic “job blackmail” episode involving defense contractor General Dynamics’ Bath Iron Works (see below) triggered a debate that resulted in a disclosure system covering seven programs including BETR; however the reports were never put online. Even though BETR was largely replaced with the Business Equipment Tax Exemption (BETE) in 2007, the program still has significant ongoing financial impact.
Maine’s big-ticket subsidies operate via the tax code. The Employment TIF, which despite its name is not a conventional tax increment financing program, allows companies to keep a portion of their employees’ state income taxes. ETIF is part of the larger Pine Tree Development Zone incentive program that bundles insurance premium tax credits, corporate income tax credits, sales and use tax exemptions, and reduced electricity rates.
Tragically, Maine’s offline subsidy disclosure law was quietly repealed in 2009. Our examination of five leading programs found online disclosure for only one program.
Key Subsidy Programs
|Subsidy Program||Recent Annual Cost||Online Recipient Disclosure||Recipient Disclosure Score*||Job-Creation/Job-Quality Score**||Monitoring/Enforcement Score***|
Business Equipment Tax Exemption (BETE)
property tax exemption for eligible property with no time limit on the length of the exemption; the state reimburses municipalities for the cost of the subsidy
|$19.4 million (FY2014)||
|0/100||not included||not included|
Business Equipment Tax Reimbursement (BETR)
controversial property tax reimbursement used for large companies; in 2007 replaced with BETE but still has significant ongoing fiscal impact
|$42.5 million (FY2014)||
Employment Tax Increment Financing
despite its name, not a conventional TIF; reimburses firms amounts equal to as much as 80% of new personal income tax withholding when creating at least five new jobs
|$7.2 million (FY2014)||
Pine Tree Development Zones
corporate income and other tax credits for firms which meet job creation and wage requirements (subsidies vary by geographic area)
|$3.3 million (FY2014)||
Research Expense Tax Credits and Super R&D Tax Credit
corporate income tax credit for qualified activities
|$4.9 million (FY2014)||
* The score is derived from the Good Jobs First report Show Us the Subsidized Jobs (January 2014).
** The score is derived from the Good Jobs First report Money for Something (December 2011).
*** The score is derived from the Good Jobs First report Money-Back Guarantees for Taxpayers (January 2012).
Major Subsidy Deals
Bath Iron Works (1997)
In early 1997 Bath Iron Works (BIW), the largest private employer in Maine, notified state officials that it wanted to undertake a major modernization of its shipbuilding operation. But in order to do so, the company, a subsidiary of military contracting giant General Dynamics, said it needed help from taxpayers. When a $307 million plan was unveiled, it included an expectation of $200 million in public funding. Apart from the state support, BIW insisted that the city of Bath provide a tax increment financing deal under which half of the property taxes on a new launching facility would be rebated to the company. The plan would allow the company to recoup an estimated $81 million over 25 years.
The city promptly approved the TIF, and the state legislature began debating legislation that would give BIW a total of $113 million in tax breaks. Of that, $60 million would come from letting the company keep a portion of the state income taxes it collected from workers. The measure passed by a comfortable margin, but both the state and local tax breaks were soon challenged in a lawsuit. That was followed by a petition drive sponsored by a group called the Committee to Stop Corporate Welfare. Both of those efforts ultimately failed, but the controversy paved the way for Maine to adopt a path-breaking subsidy disclosure program in 1998. (Key sources)
National Semiconductor (1995)
After being offered generous state and local subsidies, National Semiconductor announced in 1995 that it would spend $600 million (later increased to $800 million) on an expansion of its chip plant in South Portland—said to be the largest industrial investment in the state’s history. The package included a 50 percent reduction in property taxes through a tax increment financing agreement. The state also committed to using its new Business Equipment Tax Reimbursement (BETR) program to defray the company’s costs.
A watchdog group, the Maine Citizen Leadership Fund, criticized the subsidies, pointing out in a 1999 report that they amounted to more than $135,000 for each new job created. In a follow-up report published in 2001, the group estimated that by the end of the 15-year subsidy period, National Semiconductor stood to benefit a total of $123 million, or some $229,000 per employee. The BETR subsidy was slated to increase after the company announced an additional $58 million investment in 2004. In 2009 National Semiconductor announced worldwide job cuts, including several dozen in Maine. In 2011 National Semiconductor, which is now owned by Texas Instruments, received a one-year extension of its TIF deal. (Key sources)
Wal-Mart in Maine
- At least 3 Wal-Mart locations have received subsidies worth about $22.2 million in Maine.
- We found no instances of property tax assessment challenges by Wal-Mart in Maine, but given the absence of centralized data, it is still possible that appeals have occurred.
- Wal-Mart was found to have more workers than any other employer in the state relying on publicly-funded health insurance. This shows how taxpayers end up subsidizing Wal-Mart’s policy of providing low wages and inadequate benefits.
For more information, see the Maine page of Wal-Mart Subsidy Watch.