Mills Pitches “Dirigo Business Incentive” to Replace Pine Tree Development Zones

Maine’s nonpartisan Revenue Forecasting Committee (RFC) said Friday that it’s projecting a $223 million increase in state revenues for the current biennium.

That means lawmakers have an unexpected pot of money to deal with, but Gov. Janet Mills and Republican leaders have competing plans for how they ought to spend it.

Republicans would like to use increased revenues to lower state income tax rates.

Gov. Mills wants that revenue to fund new legislation that will replace the Pine Tree Development Zone (PTDZ) program with a new tax credit program.

On Thursday, a Mills Administration press release included a statement of support for the proposed program from Rep. Jack Ducharme (R-Madison), a respected member of the Appropriations and Financial Affairs Committee, signaling the revamped tax credit program has buy-in from at least a few Republicans.

But backing Mills’ new plan will likely come at the cost of the structural tax reform Republicans called for on Friday, because those future revenues can’t be spent twice. It appears Republicans painted themselves into a corner, much to the benefit of the Mills Administration.

The PTDZ program allowed certain companies to reduce state taxes if they met certain qualifications. The companies must be in the following sectors: Biotechnology, Aquaculture and Marine Technology, Composite Materials Technology, Environmental Technology, Advanced Technologies for Forestry and Agriculture, Manufacturing and Precision Manufacturing, Information Technology, or Financial Services.

To benefit from the PTDZ program, companies had to provide wages above the county average, including health benefit plans and retirement benefits.

The benefits included reduced corporate tax credits, sales and use tax exemptions, employee income reimbursements of 3.6 percent, and reduced electricity rates.

The program, originally created in 2003, was going to expire in 2021 before the legislature agreed to extend it through the end of 2023.

Mills’ proposed new program will be called the “Dirigo Business Incentive.”

The Mills Administration said in its press release that the new program addresses Maine’s current economic needs, focusing on workforce development and attracting high-value industries.

“Everywhere I go, business leaders tell me they need more workers,” said Mills, in the written statement. “By incentivizing companies to make direct investments in worker training, and by targeting incentives to attract and expand promising, high-value sectors, we can tackle our workforce challenges and build a stronger economy with better-paying jobs for Maine people.”

Although the text of the legislation has not been released, Mills offered a few details that would be included in the new program.

The proposed legislation offers businesses a $2,000 tax credit per worker trained in approved employee training programs and up to a 15% credit for capital investments in most of Maine, with a 7.5% credit for York, Cumberland, and Sagadahoc counties.

None of that really means anything for prospective businesses until they can see the fine print.

Senate President Troy Jackson (D-Aroostook), the bill’s sponsor, said, “The Dirigo Tax Credit continues investments in Maine’s business community, promotes quality, good-paying jobs, and fuels growth in emerging and heritage industries.”

Mills’ new incentive program would also replace the Employment Tax Increment Financing and the Maine Capital Investment Credit, which would end alongside the PTDZ Program on December 31, 2024.

“The Governor and lawmakers can rework the Pine Tree Development Zone Program all they want, and call it whatever they want, but it doesn’t change what the program effectively is–corporate welfare,” said Maine Policy Institute CEO Matt Gagnon.

“In the absence of a competitive economic environment, businesses want tax incentives for taking risks, creating jobs, training employees, and making investments,” Gagnon said.

“Instead of misallocating resources with poorly targeted credits or other so-called ‘incentives,’ the answer is to foster an economic environment that welcomes capital investment and job growth in the first place,” he said.

(Disclosure: The Maine Wire is a project of the Maine Policy Institute.)