Maine State Planning Office logo

 
Maine State Planning Office 
Economics and Demographics 
Forward to a Friend Vol. I, Issue 3
  November 2008
In This Issue
Double-Counting Property Taxes?
30 and 1000 Revisited
Maine's Tax Rank on the Move
Snapshot of Maine's Economy
2007 American Community Survey
Census Highlights

Quick Links
Join Our Mailing List
Greetings from the Economics and Demographics Program.

This is the third edition of the Economics and Demographics newsletter from the Maine State Planning Office. If you have received a text version and would like to see the full version, please visit our website. Please let us know if you have any comments or suggestions.
Double-Counting Property Taxes?

For years, people who follow Maine tax policy discussions have noticed discrepancies in the data on which those discussions are based. This summer the Tax Foundation, which famously ranked Maine as having the highest tax burden in the nation, revised its ranking methodology; now we rank 15th (see "Maine's Tax Rank on the Move" below).[i] While the source of the change is not entirely clear, the change made one fact very, very clear: even the simplest statistics can be miscalculated, misleading, or just plain wrong.
 
In the "just plain wrong" category we can now place another tax statistic: the US Census Bureau's past estimates of Maine property tax revenues. Here's the story:
 
Every five years (1997, 2002, 2007, etc) the Census Bureau conducts a Census of Governments. In Maine, the survey goes to municipalities, counties, school districts, water and sewer districts, etc. This survey serves as the basis for estimates made in years during which no survey is collected.
 
The Census Bureau asks municipalities not to report taxes raised on behalf of another level of government. When asked how much they collect in property taxes, for example, municipalities should not include taxes raised for counties and school districts.
 
Based on comparisons of Maine and Census data sources, it has become apparent that not all municipalities have followed those instructions and, consequently, the Census estimates of property taxes are consistently overstated.
 
The legislature's non-partisan Office of Fiscal and Program Review estimated a $262 million difference between property taxes reported in the 2002 Census of Governments and Maine sources.[ii] Assuming a $262 million overcount that year, Census staff estimate that Maine's state and local property tax burden per capita rank would fall from 4th to 9th.[iii]
 
The Census Bureau has acknowledged that two revenue streams have been subject to double counting: i) property taxes raised by municipalities and given to counties, and ii) property taxes raised by municipalities and given to school districts. According to Danielle Jones, a Census Bureau statistician, "Over the past 5 years, [Maine property tax revenue] has been over-estimated by 15-22% ($200-300 million)."
 
Based on conversations between the State Planning Office, the Census Bureau, Maine Municipal Association, the State Auditor, and other interested parties, the general consensus is that the Census Bureau's survey form is not well suited to Maine's unique tax system. These parties are working together to customize a form for Maine towns and create a central collection agreement.
 
Sorting fact from fiction when talking about taxes will always require vigilance. Thankfully, the task should become a little easier with the Census Bureau's recent acknowledgement of double counting, and its efforts to correct the problem. The impact of this improvement could be far reaching since Census data is the basis for nearly every tax ranking, including the Tax Foundation's.

[i] Tax Foundation. 2008. "State-Local Tax Burdens Dip as Income Growth Outpaces Tax Growth." Special report 163. Available online: http://www.taxfoundation.org/publications/show/22320.html
 
[ii] Maine State Legislature, Office of Fiscal and Program Review. 2006. "Maine's Tax Burden: History and Projections." Available online: http://www.maine.gov/legis/ofpr/Tax%20Info/Tax%20Burden%20Report%20-%20March%202006.pdf
 
[iii] Danielle Y. Jones. 2008. "Consequences of Bad Data: A Case Study of Maine Property Taxes." Presentation at the Council of State Governments Eastern Regional Conference, 48th Annual Meeting and Regional Policy Forum. Atlantic City, NJ.
30 and 1000 Revisited
 
New report reinforces the connection between education, research and development, and Maine's per capita income. 
 
In 2001, the Maine State Planning Office published "30 and 1000: How to Build a Knowledge Based Economy in Maine and Raise Incomes to the National Average by 2010." A wordy title, but a simple idea: by increasing the percentage of Maine adults with 4-year college degrees to 30%, and raising the amount spent on Research and Development (R&D) to $1000 per employed worker, Maine's per capita income would rise to the national average or higher. Thus, the 30&1000 strategy was born.
 
The 30&1000 strategy was predi­cated on the strong correlation be­tween states with above average income levels and their correspond­ing high rates of adults with 4-year degrees and spending on R&D (by all parties, from all sources). Con­versely, states which scored below average in these categories consis­tently ranked near the bottom in income levels. At the time of original publication, Maine fared better than only a few states in educational at­tainment and R&D expenditures, and was in the bottom third for per capita income.
 
SPO has updated the original 30&1000 model with recent data. The new data show improvement, particularly with educational attainment: Maine has increased the percentage of adults with a Bachelor's degree or higher from 19% in 1998 (46th among states) to 27% (24th among states) in 2006. However, the new model indicates that, while progress has been made, achieving the 30&1000 targets might no longer be enough to reach today's national average per capita income. In other words, as educational attainment and R&D spending in other states have improved, the targets have moved.
 
The new model suggests that, in order for Maine to reach the national average for per capita income, the percentage of adults with 4-year degrees must rise to 33%. And the level of R&D funding per employed worker must increase to $1800. In short, 30&1000 has become 33&1800. These results reinforce the need for con­tinued investment in Maine's education­al and research infrastructure.
 

Maine's Tax Rank on the Move 
 
Every year, the Tax Foundation estimates the tax burden of each state's residents. It ranks the states from highest to lowest and, until recently, Maine always appeared near the very top of the list. This year was a surprise. When the Tax Foundation released its annual report in August, Maine was ranked 15th.[i]
 
To understand why, it's important to note that the Tax Foundation ranks states according to the amount of taxes residents pay, not the amount that state or local governments collect. For instance, a York resident who works in Massachusetts would pay income tax to the State of Massachusetts. Those taxes would be counted as part of the tax burden of Maine residents. Property taxes paid by a summer resident of Camden whose legal residence is New York would be counted as part of the tax burden of New York residents.
 
The reason for Maine's dramatic change in rank is not entirely clear, but the latter example of property taxes paid by out-of-state residents seems to have played a role. According to the Tax Foundation's William Ahern, "Until now, we haven't been able to get an accurate sense of nonresident home ownership... With new data, our study keeps getting better and better."[ii]
 
Since Maine's 15th rank is the product of a slightly revised methodology, and the use of new data, it's possible that further revisions are on the way. Nevertheless, the change highlights the need to interpret tax rankings with caution.
 
Perhaps more important than Maine's rank is the direction our tax burden is going: down. According to the Tax Foundation, it went from 11.0% in 2005 to 10.0% in 2008. In February 2008, Maine Revenue Services calculated that Maine's "effective tax rate" (a measure very similar to "tax burden") fell from 11.76% in 2004 to 11.14% in 2007.[iii] Both measures indicate that the tax burden on Maine residents has gradually declined for the last few years.

[i] Tax Foundation. 2008. "State-Local Tax Burdens Dip as Income Growth Outpaces Tax Growth." Special report 163. Available online: http://www.taxfoundation.org/publications/show/22320.html
 
[ii] William Ahern. 2008. Quoted in "Maine Tax Rank Improves to 15th," by Eric Russell. Bangor Daily News, 9 Aug. 2008. Available online: http://bangornews.com/news/t/news.aspx?articleid=168187&zoneid=500
 
[iii] Maine Revenue Services. 2008. "Tax Burden Analysis." Available online: http://www.state.me.us/spo/economics/ld1/2007/taxburdenanalysis.pdf
Snapshot of Maine's Economy
 
As part of our role in staffing the Consensus Economic Forecasting Commission, the Economic and Demographics Team tracks economic indicators for Maine. Since January, the national and state economic outlook has worsened. In the past nine months, the continued decline of the housing market and turmoil within the financial sector has caused further reduced consumer spending and business investment. Despite federal interventions such as the economic stimulus package and the $700 billion bailout bill, economic conditions have continued to weaken, resulting in job losses, a credit freeze, and significant anxiety among consumers and business owners. Read the most recent report from the CEFC, including the latest Maine economic forecast.

State Data Center News

Maine's Source for Census Data
 Census 2010: It's in our hands
 
Upcoming 2007 American Community Survey Release 
 
In December 2008 the U.S. Census Bureau will release the first multi-year estimates for the American Community Survey. These 3-year estimates will provide demographic and social data for geographies with populations of 20,000 or more. Previously, data provided by the American Community Survey have been available only for geographies of 65,000 or more. These geographies will now have both single years of data and 3-year estimates available. 

The first 3-year estimates will cover 2005-2007 data; new 3-year estimates will be available going forward on an annual basis (for example, in December 2009, data for 2006-2008 will be released). It is important to keep in mind that overlapping sets of 3-year estimates should not be compared. For example, 2005-2007 and 2006-2008 overlap by two years and so should not be compared.
 
For more information on the American Community Survey and the multi-year estimates, visit the American Community Survey website. The Census Bureau has also begun issuing handbooks detailing what users of the American Community Survey data should know. To download any of the handbooks, visit the ACS Compass Products website.
 
Census Highlights 
  • Interested in a job with the Census? The Census Bureau has posted job openings for two assistant managers, a partnership specialist, and a regional technician for the Portland Local Census Office. For more information, or to view the job postings, visit the Boston Regional Office website or call 1-877-355-6188.

 

  • On October 9, 2008, the Census Bureau released the 2005 small area health insurance estimates for counties. For more information, view the press release.

 

  • On September 23, 2008, the Census Bureau released the 2007 American Community Survey characteristics data. For more information, view the press release.
This newsletter is prepared by the Maine State Planning Office's Economics and Demographics Team. It is designed to provide economic and demographic information and analysis to state policy makers and affiliates of the Maine State Data Center. 
 
SPO Economics and Demographics Team:
(207) 287-6077 
Michael LeVert, Economist
Amanda Rector, Economist
Catherine Reilly, State Economist
 
Special thanks to Linda LaPlante for assisting in the production and distribution of this newsletter.