Tax cap ruling sought by MMA Reform initiative said to violate law

AUGUSTA – Claiming large portions of a California-styled tax cap are in conflict with existing state law, a municipal lobbying group is asking the Legislature to seek an advisory opinion from the Maine Supreme Judicial Court.

Geoffrey Herman, legislative director for the Maine Municipal Association, said Friday he hoped the Legislature would declare a “solemn occasion” in order to obtain an incontestable opinion from the high court on the constitutionality of the tax cap initiative.

The proposal will appear on the November ballot barring action by the Legislature to move the question to the June primary.

Advanced by the Maine Taxpayers Action Network under the leadership of tax reform activist Carol Palesky, the tax cap is under review by the Legislature’s Taxation Committee.

Under Maine law, a citizens initiative such as the MTAN tax cap must also be presented in bill form to the Legislature. The Taxation Committee is scheduled to revisit the proposal as LD 1893 on Wednesday.

The committee can adopt the bill as presented or reject it, allowing it to proceed to a statewide vote. Under no circumstances can lawmakers amend the bill.

The 3,000-word initiative would cap property taxes at 1 percent of local valuation as it existed in 1997, and Palesky said the MTAN proposal also would require each taxpayer to assume their share of any existing debt incurred by the community in which they reside.

Palesky told members of the Taxation Committee earlier this week the cap would produce a statewide tax rate average of around $17 per $1,000 of local valuation. But she backed away Friday from that earlier assertion, which gauged the average Maine community’s debt service at 7 mills under the cap.

That point was contested by the MMA, which maintains the average debt level for small and large communities in Maine runs between 0.75 and 2 mills.

Palesky said Friday she meant to include new levels of taxation provided under the initiative to round out the 7-mill estimate.

Under the cap, Palesky said, tax policies would change to include a tax assessment based on a property’s most recent purchase price, rather than relying on an assessment that could be more than 10 years old. Properties sold from one family member to another would be excluded from that provision of the cap.

Regardless of the additional money Palesky maintains would be generated by the new assessment policy, Herman said Friday that LD 1893 would deplete municipal resources by more than 50 percent of current property tax revenue.

He said one of the constitutional conflicts posed by the cap is its mandated freeze on valuation. The constitution requires taxes to be assessed and apportioned equally according to “just” or “market” value.

Herman also emphasized the Palesky cap would restrict legislative authority to enact any changes on real or personal property taxes in violation of constitutional provisions prohibiting the Legislature from “suspending or surrendering the power of taxation.”

“The appropriate thing to do is ask these questions through a solemn occasion,” Herman said. “Regardless of the opinion of the law court, it would not have the effect of changing the initiative, but it would provide some indication of what could happen if the provision were adopted by the voters. At that point, the issue would become more ripe for the law court to make a binding decision.”

Noting the MMA has its own tax reform proposal on the June ballot, Palesky countered Friday that Herman was simply trying to “scuttle” the MTAN initiative in the courts. The Topsham accountant said the cap was modeled after California’s tax policy and withstood a review by the U.S. Supreme Court.

“We copied our words from exactly what the U.S. Supreme Court ruled,” she said. “We did it intentionally, so it couldn’t be overturned. So [Herman] is reaching on these points. I find it more distressing that the MMA is using tax dollars paid in dues by municipalities to fight us. I would think that that is unconstitutional.”

The Maine Attorney General’s Office is expected to send a representative to Wednesday’s Taxation Committee meeting where the MMA request is likely to be discussed further.

The Senate president, the speaker of the House or the governor can seek a solemn occasion although the court is not obligated to honor the request.

Legislative leaders said Friday they had not been officially requested to pursue such an opinion, but remained open to the suggestion. Sen. Stephen Stanley, D-Medway and co-chairman of the Taxation Committee, allowed that the law court request might be a good idea.

“It’s worth taking a look at because the voters are going to have to act on this and they need to be informed because it affects a lot of people,” Stanley said. “We wouldn’t be doing it to turn the vote against [Palesky]. There’s a lot at stake here and we need to make sure we’re doing the right thing.”