The Tree Growth Tax, Maine’s premier current-use tax law, goes back to the early 1970s when the Legislature, at the urging of paper companies and other big forest landowners, crafted it as a way to tax land on its ability to grow trees, rather than as conventional real estate. At the time, the backers of this innovative tax plan believed, it could accomplish two things: help the forest products industry by shielding landowners from growing pressure to sell land for purposes other than timber production, and at the same time protect the environment by lessening the likelihood that owners would convert their timberland into sprawling second-home developments. The tax was drafted to help individual woodlot owners all over the state as well. The state, it was agreed, would reimburse municipalities for 90 percent of lost revenue, and the Tree Growth Tax went into effect to generally good reviews.
Much has changed over the past three decades. Much former paper industry land has been sold to investors with goals other than “wooding” mills in Skowhegan, Millinocket, Rumford or Westbrook. Papermaking in Maine isn’t what it once was. Timberland’s value for purposes other than tree-growing has grown, and the pressure for second home development has continued to build. Road access has transformed parts of the North Woods from a tree farm to a multi-use recreational area.
Meanwhile in island communities, where qualifying landowners (none of them paper companies; many of them woodlot owners) have made use of Tree Growth taxation for years as a way to lessen their property tax bite, the sharp rise in land values has changed the picture too. There’s more pressure than ever on landowners to pay ever-higher property taxes, particularly for shore frontage, making Tree Growth designation ever more attractive. The state, hard pressed to pay its bills, has been remiss in its reimbursements to towns for land under Tree Growth. And municipalities, harder pressed than ever to meet their rising costs, are less and less likely to look kindly on land that’s taken off the regular property tax rolls.
Not surprisingly, therefore, there’s a movement out there, endorsed by the Maine Islands Coalition, to reform the Tree Growth program. Just what that reform looks like in the end will depend on the deliberations of a special committee proposed to look at the 35-yeear-old Tree Growth law. The outcome will hinge on the definition of “commercial use” and who qualifies for Tree Growth; on how the Legislature looks at varying market situations (it’s seldom cost-efficient to harvest timber on islands, for example), and the matter of reimbursements.
Current-use taxation can be a great idea — two years ago the state allowed certain working waterfronts to be taxed this way, and farmland and open space have qualified for years — but when we grant it, someone always has to make up the difference. As circumstances change it’s always wise to examine how well a law is working. Re-examining Tree Growth and its impact on landowners and communities is long overdue.