Competing Tax Relief

The challenge of reforming Maine’s creaky tax system is made apparent by the trouble the Baldacci administration and lawmakers are having as they try to find an alternative to the ballot initiative from the Maine Municipal Association. The governor, like the MMA, has the basics right. But he errs if he believes he can impose spending caps that will work long term.

Maine relies too heavily on a 19th century measure of wealth – property – and limits other forms of taxation, mostly sales taxes, based on habit and political influence. This produces all sorts of negative effects, including creating the need for special tax breaks for the poor to keep them from being taxed out of their homes. These programs, naturally, are inadequate. And it creates costly suburban sprawl beyond the borders of high tax service centers and gives tax breaks to visitors while leaving the cost of operating Vacationland to residents who can’t afford time off.

The MMA proposal exists because municipalities grew tired of waiting for the state to fulfill its commitment to funding K-12 education. The state should fund 55 percent of the costs; it struggles to reach 44 percent, and does even less well when public revenues are tight. The governor, apparently having found it too difficult to actually reform the state tax structure, has proposed a more modest plan addressing just two, admittedly large, issues. He would impose caps on municipal spending (or he would try to) and he would let growth in state tax revenues swell the percentage of the state education share within the restrained local spending.

The tax-cap idea, ridiculed by Demo-cratic policy-makers when citizens have presented related versions as ballot initiatives, is the centerpiece of his plan. Without question, local government can do more to save money while still delivering services. But they can also delay needed maintenance and put off money-saving projects to meet state spending limits, then encounter expensive crises five or 10 years later. These types of delays have happened in Maine and in other states and they are not done out of malice but of having too few alternatives for meeting public demands. California’s Proposition 13 stands as a model of what happens to communities when a heavy-handed state government sets limits carelessly.

As for the promise to fund 55 percent of the Essential Programs and Services formula for schools: Maine is supposed to be well along this year in meeting that level of funding; the governor decided the budget would not allow it and left out the needed money. Another promise to meet the funding level is nice, but it doesn’t mean much.

The weakness of the MMA plan has been pointed out repeatedly: It doesn’t identify how the state will find the additional $264 million the plan requires be sent to municipalities. It is, of course, a serious failing. But not just any alternative to it is preferable. The governor and lawmakers have more work to do before settling on a competing ballot measure.