Advisory panel targets tax reform Saxl seeks consensus for change

AUGUSTA – Although previous efforts to reform Maine’s volatile tax system have succumbed to pressure from special interests, the recommendations of a new advisory committee may succeed where others have failed.

House Speaker Michael V. Saxl’s Advisory Committee on Tax Reform held its first meeting Monday with about 25 lobbyists and special-interest groups represented. Many agreed the state’s ongoing problems with budget shortfalls and a widening gap between incoming revenues and the growth in state spending have combined to serve as a catalyst for tax reform.

In the mix is the possibility of a 2003 referendum on a tax cap that would limit property taxes to 1 percent of a property’s assessed value. If such a question succeeds in getting on the ballot, Saxl believes, the incoming 121st Legislature will have to act.

“It may be that the Legislature will need to support the [advisory panel’s] initiative or craft a competing measure,” said the Portland Democrat.

Saxl, who is barred from seeking re-election to his seat by Maine’s term-limits law, hopes he is not out of office by the time his committee issues its report to the next Legislature, which will be seated in January 2003. But during Monday’s meeting, a suggested deadline of Nov. 1 for issuing recommendations received a tepid response. The 10-member committee agreed to meet again Aug. 9 to begin the process of identifying structural changes to revamp the state’s tax system.

Members of the panel include former Gov. Kenneth Curtis, former Maine Supreme Judicial Court Chief Justice Daniel Wathen, and Deirdre Mageean, director of the Margaret Chase Smith Center for Public Policy.

Geoffrey Herman of the Maine Municipal Association, who is serving as an adviser to the committee, said that unlike previous tax reform panels, there are no legislators on the panel besides Saxl. Because of that, he said, committee members should be less inclined to consider the political consequences of advocating unpopular changes to the tax code.

He agreed that the ongoing budget shortfall – which is expected to exceed $200 million for the current two-year budget and could surpass $750 million for the next two-year budget -is now of considerable concern to Maine voters.

“The stars might be well-aligned for change,” Herman said. “Typically, reform needs a crisis to precipitate it – it just doesn’t come about on its own without some need for it to happen. In January, if the Legislature encounters some significant problems similar to the 1991 shortfall, then a tax reform recommendation that can help solve those problems in the long term that’s been judiciously crafted by a panel like this, would be worth the effort.”

Christopher “Kit” St. John of the Maine Center for Economic Policy, who also serves as an adviser to the committee, said there are “stronger forces at work than there have been in the past” for devising a new tax strategy for Maine. He pointed to a recent tax reform initiative sponsored by Rep. Barney McGowan, D-Pittsfield, that passed in the House in May but died in the Senate, as evidence of growing consensus that a tax problem exists.

“But there is not yet consensus on what needs to be done, and that is where this group may be able to bring different groups together to reach greater consensus than has been reached in the past,” he said.

Finding the right approach to the problem will be critical for the panelists who must decide how to determine the total amount of tax revenue Maine can realistically generate and the spending priorities for those revenues. St. John believes the advisory committee must choose between tailoring state spending to reflect existing revenues or revamp state revenues to generate enough funds for the budget’s three principal priorities: local education, higher education and health care.

“Those are three areas that are going to grow and the consensus of the people will be to continue to support those things,” he said, adding that the cost of those programs would definitely exceed current revenues. “That’s the vise that state government is currently in and that will lead to interest in a revenue structure which grows in line with those expenses.”

A looming September special session of the Legislature is likely to focus even more attention on the state’s revenue shortfall and will provide an opportunity for Saxl to make his point even as House members debate the underlying problems in the budgetary process.

“We haven’t been at this place in Maine history before; there seems to be a tremendous amount of independent momentum around the issue of tax reform and tax relief among members of the public,” Saxl said. “I think [a special session] enhances it and makes it plain that tax reform is badly needed.”

Regardless of what recommendations the panel makes to the next Legislature, the real work of crafting consensus among rank-and-file lawmakers will fall to Maine’s next governor. Former Gov. Curtis said it will be up to the new governor to seize upon the panel’s findings and sell them to the Legislature. Curtis was forced to make a similarly bold move in 1969 when he signed Maine’s state income tax into law.

“We didn’t go for an income tax to make people suffer,” Curtis said. “We had run out of options and I think maybe that’s what the new governor is going to find.”