Woodlot owners weigh tax-reform effects

AUGUSTA – The fact that rising property taxes are pushing people off their land came as no surprise to members of the Small Woodlot Owners Association of Maine at a panel discussion Wednesday morning.

Maine’s 100,000 small woodlot owners have been lobbying for tax reform for decades, watching as tree property is taxed at the same rate as house lots and high taxes force landowners to sell forests for house lots.

Members of SWOAM gathered at the 62nd annual Agricultural Trades Show to learn what innovative proposals and options will be on the table this year to ease the crisis.

“The value of all property taxes in Maine last year increased by 10 percent,” said Rep. Peter Mills, a member of the Legislative Taxation Committee. To put that in perspective, Mills said the increase in values in York County in a single year are greater than the entire value of Piscataquis County.

Tax reform is on everyone’s agenda, Mills said, but balance must prevail. Citing a proposal for a 2 percent tax on all sales, Mills agreed it would generate badly needed revenue. “But 2 percent on a destroyer made at [Bath Iron Works] means Mississippi gets the contract,” he said.

The 2003 fall referendum is expected to have at least three to five tax reform proposals for voters to deal with, and with several of those expected to be presented first to the 121st Legislature, a panel Wednesday morning discussed options and what their effect would be on woodlot owners and farmers.

The panel included Daniel Wathen, former chief justice of the Maine Supreme Judicial Court and a member of the Speaker’s Committee on Taxation Reform; Rep. Bernard McGowan of Pittsfield, a member of the Taxation Committee who is proposing a measure to cap education expenses to municipalities; Mills of Skowhegan, a veteran member of the Taxation Committee; and David Hill of Yarmouth, who is proposing a Maine Land Bank Program.

Wathen said tax reform is a complicated balancing act. “Anyone can make a good proposal stand on its own,” he said. “The trick is making sure the proposal deals with the whole tax system and pays for itself.”

Maine is between the fifth- and eighth-highest-taxed state nationwide, Wathen said, but Maine has the narrowest tax base.

“Maine’s tax structure is outmoded, misaligned, volatile and unreliable,” Wathen said. “It is narrow because we have exempted $12 billion of property. We exempt goods and services from the sales tax that, if they paid, we would have $2.6 billion extra – more than the entire general fund budget.”

McGowan’s proposal, which was narrowly defeated last session, is back this year with fresh support.

“We have to put more money back in the people’s hands to stimulate the economy,” he said. He proposes a 4 mill property tax cap for all property except second homes, which would have a 12 mill cap. The money would be set aside for education purposes.

The proposal would deliver $350 million in property tax relief while increasing the sales tax to offset increased state payments for education to municipalities.

McGowan suggests taxing businesses, services and recreation, such as skiing, bowling and golf.

Hill’s proposal, called the Chebeague Plan, would create a voluntary land bank program, where land would be taxed on a base value, and annual tax increases would be limited to 2 percent. A substantial penalty for withdrawing from the plan would generate funding for the program.

“People will be protected from property taxes that threaten to evict them from their homes,” Hill said. “Community stability will result, preserving the character and traditions of our cities and towns.”

Maine Municipal Association also has proposed legislation requiring the state to provide 55 percent of education costs to municipalities. The plan does not specifically state how it will be funded.

A tax cap program initiated by Carol Palesky of Topsham is being harshly criticized, again because of the lack of a funding mechanism.

Mills, however, was not optimistic about the menu of tax solutions.

“One of the choices next fall will be ‘none of the above,'” said Mills. “Can you imagine the chaos next fall? I think ‘do nothing’ will win again.”