March 29, 2024
BANGOR DAILY NEWS (BANGOR, MAINE

Tax reform momentum

It is far too easy to dismiss a new Tax Foundation report that Maine has the eighth-highest property taxes per capita in the country — fourth-highest as a percentage of income — as mere confirmation of what Maine taxpayers already know. It is far too convenient to cite flaws in the report as reason to disregard it.

The study by one of the nation’s oldest and most esteemed public-policy research organizations does restate the obvious and there are a few nits to pick (the 1996 cutoff for data omits the enactment of the homestead exemption and increases in state aid to education), but its timing is impeccable. Maine has its best opportunity in a decade to get moving on real tax reform and the foundation’s dreary numbers should add to the momentum.

When the first session of the Legislature adjourned in June, there was a growing realization among lawmakers that the unabated rise in property taxes was due much more to erratic state revenues and the consequent shift of obligations to the property tax than it was to excessive spending by towns and school districts. When the second session convenes in January, it should have in hand recommendations that could help stabilize the state’s finances and stop the local bleeding.

Some of those recommendations will come from the Taxation Committee’s Subcommittee on Tax Volatility. This group of five legislators, led by Sen. Beverly Daggett and Rep. Kenneth Gagnon, is in the midst of reviewing the relationship between Maine’s present tax system and the instability that results from unpredictable surpluses in good times and shocking shortfalls in bad. It is an innovative review that will explore the more stable tax systems of other states and that will assess the potential of alternative forms of taxation, such as gross receipts taxes.

Maine’s tax structure certainly has been studied before, but never in a concerted effort to understand and remedy its wild revenue fluctuations. And it is the wild fluctuation of 1990, the sudden collapse of sales and, to a lesser degree, income tax revenues that started the shift to local property taxes that continues to widen the education gap between rich and poor communities and to poison the relationship between townspeople and their schools. This subcommittee no doubt will come up with some good ideas, but they will only be as good as the full Legislature’s willingness to listen.

The Taxation Committee also is now reviewing sales tax and property tax exemptions. These are routine reviews required by statute but the need for substantial change is pressing.

Tax experts agree that the best sales tax is one with the broadest base and the lowest rate possible. Maine’s exemption-ridden base is so narrow that a full 20 percent of its revenue comes from vehicle sales. It doesn’t take much of a shudder in the economy to drain the revenue stream. A revision of property-tax exemptions is long overdue — communities that are regional centers for government, social, educational and health-care services are shouldering an increasingly unfair burden.

The conditions are in place for the Legislature to enact meaningful tax reform: The memory of the recession is still fresh and the damage it did is still apparent; another strong surplus creates the opportunity for change; the work of the Taxation Committee provides a good starting point for constructive action. The Tax Foundation report should provide the nudge needed to get things going.


Have feedback? Want to know more? Send us ideas for follow-up stories.

comments for this post are closed

You may also like