NEW LOOK AT AN OLD TAX

How Maine gets itself out of its latest tax mess – a demand for tax relief on the local level and a huge shortfall of revenues at the state level – should be one of the more entertaining and frustrating events on the legislative calendar. Rep. Peter Mills of Cornville proposed a partial solution not long ago: Stick with William the Conqueror.

Rep. Mills offered this advice at University of Southern Maine’s Muskie School in a talk on how to pay for the programs the state tries to deliver. “William the Conqueror knew a thing or two about raising revenue,” he said. “In 1086, he taxed his subjects according to their wealth and did appraisals to tax them fairly. In his day, wealth was tangible and therefore easier to assess.”

But wealth is not as tangible today. Now it is in copyrights and patents, stocks and bonds. These are much harder to tax and, for many reasons the state would put itself at a disadvantage if it taxed some of them. But that doesn’t mean Maine should give up on taxing property as a measure of wealth, he argues. “We don’t have Alaska’s oil, Connecticut’s insurance companies, New York’s stock exchanges, Wyoming’s coal or California’s silicon capitalists; but we do have some of the finest real estate on earth and lots of it. It is perhaps the biggest reason people move here.”

Rep. Mills argues that taxes are not so much too high as uneven – hurting part of the population dreadfully but most of it not so badly. He points out that the current average municipal tax rate of 18 mills is the same as it was 30 years ago. This, he argues persuasively, should push Maine to direct relief of property taxes through the circuit breaker program, which is for homeowners an d renters, school funding, through the new Essential Programs and Services model, and Revenue Sharing to municipalities. Maine might, for instance, significantly shift funding from Revenue Sharing to Revenue Sharing II, which sends relief only to those communities that have higher tax burdens, largely because they are service-center communities.

William the Conqueror’s view on reserve accounts are not known; Rep. Mills also urges the state to build up its accounts to help reduce the roller-coaster of surpluses and deficits on which the state rides white-knuckled year after year. He offers some encouragement in this area, the reserves in the unemployment compensation fund, which may have been Gov. Angus King’s most important unheralded success. Reserves, which were once considered below safe levels, were brought up over several legislative sessions to more than $400 million, with taxes on employers falling as a result. Maine can set aside money, making the state stronger.

All of the debate over tax reform in the next legislative session will turn on the upcoming vote for tax relief that the Maine Municipal Association placed on the ballot last November and the fear that a new tax-cap measure will also be on the next ballot. This isn’t a time for panic, but for a fresh look at an old problem – a fair and effective means for collecting the revenue Maine has decided it needs to provide the services it has decided it wants. A new regard for property taxes, levied based on an ability to pay, is worth a look.