Reform with a Hammer

The Maine Taxpayer’s Action Network, intentionally or not, couldn’t have given the state more chances to avoid its property-tax cap, a sledgehammer blow to municipal budgets that likely will go to voters via citizen’s initiative either in June or November. Where MTAN warned, the state dithered. It delayed. It tried a little bit of one reform then considered some others. Years went by in this futile fashion and all the while MTAN promised it would inflict its solution on Maine. Finally this week, the Secretary of State’s Office concluded the group gathered enough signatures to get its measure on the ballot.

There’s no sense downplaying the effect of the measure should it pass. Bangor will collect about $38.5 million in property taxes this year. Under the initiative, which limits taxes to 1 percent of assessed value, the city could collect less than half that, leaving a $20 million hole in a total budget of around $69 million. There is no way to make this up through cutting waste; services will go; fees for other services will be imposed; schools will be drastically underfunded. That’s not reform, it is punishment.

Plenty of other states have tax caps but not many of them are a firm 1 percent and not many municipalities in other states are as dependent on property taxes as are those in Maine. That, in fact, is a major reason property taxes are so high in some communities – there are so few other sources of revenue. Reducing property taxes is a good idea. Reducing them without replacing most of the lost revenue with a fairer tax is not.

There is no question that Maine has a tax problem. Whether it ranks first, fourth or tenth in tax burden, its rates are high in areas that matter for development. Its proximity to New Hampshire, with that state’s lack of income tax, makes matters worse, and combined with high energy costs and the distance from major markets, Maine has a slow-moving crisis in the collapse of its economy. Policy-makers seem to know this theoretically but have trouble putting aside their pet preferences to act.

Nothing would highlight this more than if the MTAN initiative were passed by voters while the governor’s office and the Maine Municipal Association continued to argue, as they have been doing for months, about how to craft tax reform. If only they could deliver together as MTAN has done on its own.