June/July 2006

80af4fcb5847dde5-tabor

Maine Governor John Baldacci explains the new benefits if LD 1 – property tax relief –  is enacted. The system would be more equatable as property taxes are the most regressive taxing method in Maine.  Photo by Ramona du Houx

“In addition it is important that year-round residents have a cap on property taxes,” said Governor Baldacci

By Ramona du Houx

The stable economic climate which the governor has fostered would be totally disrupted if the so-called taxpayers’ bill of rights (TABOR) passes in the statewide referendum.

The largest amount of money local municipalities pay out of their revenues has traditionally been used for local schools. Logically, if the state paid a larger portion of education spending, property taxes should decrease. This was the first step of Congressman John Baldacci’s plan to help alleviate the property tax burden when he ran for governor.

Last year, due to the governor’s property tax reduction legislation (LD 1), state education funding was increased by an additional $280 million. The savings municipalities have made, because of LD 1, is finding its way back to property tax payers — as some towns across the state are lowering property taxes accordingly. This varies depending where people live, but it is a growing trend that should continue as the state continues to raise its share of education spending to 55 percent, and the other half of the governor’s property tax relief proposal passes.

LD 1 put in place spending caps on state, school, municipal, and county budgets. State government has kept to that cap.

LD 1 also increased the homestead exemption which has given property tax payers substantial state refunds. Over 94,000 people in Maine received property tax refunds from the state, compared to only 63,000 in the previous year. That amounts to an average of a $300 refund for middle-income families.

During the previous decade the average annual growth rate for property taxes was 5 percent. After LD 1, Maine’s property tax growth was only 1.7 percent.

LD 1 was half of the governor’s formula to help lower property taxes. The next step, to help property owners who have found their property taxes skyrocketing, was LD 2.

“Tax rates are only part of the problem. The other is the assessed value of your property. I don’t think anybody should be taxed out of their home because someone paid an outrageous price for the house next door. That’s why I’ve proposed a constitutional amendment that will put in place a fair and workable way to value property and keep taxes low,” said the governor, refereeing to LD 2 in 2005. LD 2, in essence, was a valuation cap proposal.

In an election year, passing legislation that would obviously make a candidate golden is nearly impossible. LD 2 was that legislation. “I don’t think the Republicans would have voted for it when it came to the final votes,” said Senator Joe Perry, head of the taxation committee. “They would not support anything this governor would get credit for [in an election year].”

The governor has revised LD 2 and will resubmit it as LD 3, as his first bill for the 123rd Legislature to vote on.

That’s how governing works — by revising proposals, working with people of all party affiliations, and listening to all concerns. It takes time to accomplish tasks that will make the lives and livelihoods of all Mainers better. It takes determination and experience.

LD 3 would fundamentally change the way property taxes are levied.

“People are being taxed out of their homes by increasing property taxes, and we need to allow people to stay in their homes. I think it is important that year-round residents, not second home owners, not seasonal residents, but year-round residents that pay income taxes, have a cap on property taxes,” said Governor Baldacci.

The governor said that under his new proposal, the value of a residence would be determined by its sale price, and the person buying the house would know that value would stay the same until they sold the house.

 

Two questions arise:

Do we need another tax cap with LD 1 in place? No. Then why is TABOR an issue? It’s an election year.

TABOR proposes to limit growth in state spending by linking expenditures to increases in population and inflation, and requires a two-thirds vote in the Legislature and voter approval for measures to boost revenue. Many say it is draconian.

Requiring a two-thirds majority is an unrealistic limitation. Social issues and Maine’s economy would suffer. Requiring voter approval for all tax and fee increases undermines the work of the Legislature and puts Mainers at risk in emergency situations.

“The proposed Maine version of Colorado’s Taxpayer Bill of Rights has major flaws that would dramatically limit the state’s ability to respond to changes in the economy and federal funds. LD 1 already put in place a cap on state spending, and the state budget for this year is well under the LD 1 cap. The TABOR proposal has a different, unnecessarily onerous cap that would interfere with funding basic human, public safety, environmental, and education services. It would require a two-thirds vote of each House of the Legislature plus a majority citizen vote to increase any state revenue. This measure would hamstring the government’s ability to respond to emergencies and federal spending cuts,” said Martha Freeman, director of the State Planning Office. “Also, these requirements could put Maine’s excellent bond rating at risk.”

“The use of population changes as a baseline is unworkable for towns and cities. Just think about the logistics involved,” said Geoff Herman of the Maine Municipal Association which opposes TABOR. “The measure’s requirements for local authorization of increases are overkill.”

If the TABOR spending limits were in effect, nearly 40 percent of Maine school districts — most of them in rural areas — would be forced to slash their budgets. “These are real cuts,” said Mark Gray of the Maine Education Association.

When TABOR petitions needed to be confirmed by Maine’s Supreme Court, five of the seven justices found the law unconstitutional.

State Attorney General Steven Rowe believes the measure is unconstitutional.

“The people of Maine understand the TABOR initiative is just another meat ax approach, like the Palesky initiative two years ago,” said Speaker of the House John Richardson.

TABOR started in Colorado with Grover Norquist, who worked with Newt Gingrich and the Heritage Foundation in Washington, DC to write the failed Contract with America.

The Maine Heritage Policy Center (MHPC) wrote the version of TABOR that will appear on the November ballot.

 

What is the MHPC?

After Peter Cianchette’s failed bid for governor in 2002 his headman, Bill Becker, was out of a job, so he started the center. Everyone else on his staff had either worked on Cianchette’s campaign or for the Republicans at the State House, with one exception — who happened to have worked for the Heritage Foundation in Washington, DC.

The Maine Heritage Policy Center is officially not a part of the Heritage Foundation, which is a conservative think tank. However the Thomas Roe Institute for Economic Policy Studies, which is a part of the Heritage Foundation, has given the MHPC grants of up to $10,000.

According to the center’s tax returns, which are public record, MHPC brought in $150,000 in 2003 and $230,000 in 2004.

The center is best known for its defaming attacks on Dirigo Health. They are noted for misusing statistical information to formulate theories that are contrary to the actual state of affairs with Dirigo Health. For many it is obvious that the former Cianchette workers never stopped campaigning against Governor Baldacci.

It’s an election year.

Make sure you vote.