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QUESTION 1

Realtors back tax-overhaul repeal

Overhaul supporters complain that ads are misleading

By Ethan Wilensky-Lanford ewlanford@mainetoday.com
Staff Writer

AUGUSTA — The Maine Association of Realtors has purchased air time for two television ads in support of repealing a tax reform law.
The air time cost the association $197,511 and was purchased through a committee it established to influence Question 1 called “Save the Mortgage Interest Deduction Ballot Question Committee,” according the committee’s treasurer, Cindy Butts.

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The opening scene from one of two advertisements supporting a "yes" vote on Question 1 funded by the Maine Realtors Association.

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Watch the advertisements purchased by the Maine Association of Realtors: http://www.youtube.com/user/SaveTheMID

As designed, the tax reform law would shift savings many homeowners receive from claiming their mortgage interest and other qualifying deductions on their state returns into a new tax credit.

Realtors are against the law because Mainers in top income brackets would not be eligible for this new credit, according to Linda Gifford, the principal lobbyist for the state association.

“The credit starts to phase out, and it goes away,” she said.

This credit phaseout begins for a married couple at $55,000 and tapers off to zero for a family that maximizes its deductions when its income reaches $275,000, according to Richard Woodbury, an economist and former lawmaker who has analyzed the current tax reform package.

Gifford said the wealthiest Mainers therefore miss out on the tax reform plan the Democratic-led Legislature passed in 2009.
“If you’re making more money, you don’t need deductions or credits under their system because you’re better off to pay a lower income tax rate, so it’s a disincentive to spend money,” she said.

For years, parents have told their children to buy homes because they get a mortgage interest deduction, she said. The incentive is weaker when the deduction is absorbed into a less visible credit, which all but the highest earners will still receive for not only mortgage interest but property tax, charitable donations and medical expenses.

“There is a credit,” Gifford said. “We think that it is worth less than the mortgage interest deduction, both in real dollars and in perception, and we think that because it phases out, it is worth less or nothing for people who we want to take advantage of the tax policy deductions and spend money.”

Supporters of tax reform — who are urging voters to reject the veto effort by voting no on Question 1 — argue the ads are deceptive.
“In one of the ads, they talk about itemized deductions going away, but they neglect to talk about the tax credits that replace the deductions. They’re only telling half the story, and they’re very misleading,” said Crystal Canney, who works for the No Higher Taxes for Maine Political Action Committee.

One of the Realtors’ ads calls the tax reform law “another government bailout for the wealthy.” 

“It couldn’t be more misleading,” Canney said.

Maine Revenue Service has said the tax reform law would lower income taxes or provide a refundable credit for 95.6 percent of Maine filers. The agency has  also analyzed tax returns and buying habits to estimate that poorer Mainers would be more likely to receive overall tax cuts than the highest earners.

A list of talking points on the Maine Association of Realtors’ website says the group also opposes reform because the new code redefines residency so that the new credit only applies to people living in Maine for longer than a year.

“This directly affects the real estate industry because those who relocate to Maine for a job, or who return to Maine after moving away, cannot have any state tax deductions or the new limited credits upon relocation,” the website states.

The Maine Association of Realtors has been promised up to $100,000 from the National Realtor’s Association for the ads, according to Gifford, although that money has not yet been transferred.

Multiple spokespeople for the state and national realty association said that, although Question 1 is exclusively a Maine issue, the national association is a vocal opponent to changing the mortgage interest deduction at the federal level.

“Nationally, when the federal government is strapped for money and looking for more money, one of the targets is the mortgage interest deduction,” said Lucien Salvant, of the National Association of Realtors. “On behalf of homeowners, we have fought this battle many times in the past.”

Political action committees and ballot question committees have until Friday to report their fiscal activities to the Maine Ethics Commission.

Ethan Wilensky-Lanford — 620-7016
ewlanford@mainetoday.com