THE NARROW CORNER

On the two walls of the narrow corner from which Maine policy-makers will operate this winter are written, on one, that state and local taxes are too high and, on the other, that they either they reform the tax system or expect the public to do it for them. Legislators have been casting uneasy looks toward the corner for years, wondering what lurks in its darker parts. Now they are in it, and the only way out is to solve the issues surrounding them.

Fortunately, this is more a matter of all interests and the two major political parties understanding they must solve the problem together rather than any magic required. Lowering taxes will take years – it will be a difficult matter of holding down expenditures while revenues rise. Few people expect Maine to give up on the progress it has made in its schools or turn its back on essential programs for health care, the environment and many other valuable services.

Reform has been discussed for several years in the Legislature. And if lawmakers are looking for further guidance they have it in a report, called “Tax Policy and Economic Development in Maine,” by Matthew Murray, a nationally known tax economist. The report was produced by the Margaret Chase Smith Center for Public Policy at the University of Maine; Dr. Murray, of the University of Tennessee, has presented ideas about taxation to Maine lawmakers before.

Some other observations from the report suggest the difficult job before legislators. Food should be added to the tax base to add yield and stability, according to the report. Relief should be provided through a drop in income tax or tax credits. “The system of local government finance is broken,” it concludes, and Maine should think about starting from scratch, with a much lower property tax and, perhaps, local taxing authority. “Reliance on a narrow set of tax instruments typically translates into higher tax rates on existing tax bases, increasing the likelihood for distortions in economic behavior,” according to Dr. Murray. This last point is important considering some of the simplistic petition drives to further limit the state’s option to raise needed revenue, forcing it to rely even more heavily on the remaining tools at its disposal.

Lawmakers will be inspired to do this difficult work because the alternative is the blunt tool of the referendum process, in which questions, once they have been approved and received the proper number of signatures, must go to the voters unaltered no matter their flaws. Petitioners are gathering signatures to cap property taxes, to lower income taxes and to ensure higher state funding of education and relieve local taxation. There are more coming and, taken together, they are a sign that the Legislature has not done its job and that the public no longer is willing to wait while lawmakers cautiously approach the problem.

The Legislature has backed itself into the choice of jumping into reform or becoming irrelevant. It’s a corner that narrows by the day.