Property tax ‘most severe’ in country

Even as mail sorters wade through this year’s surge of tax filings, many Mainers have turned to the much larger issue of statewide tax reform.

With competing property tax measures either before legislators, awaiting court decisions or headed toward a June vote, a national state tax rankings study released April 8 added fuel to the debate. Erroneous information from an earlier report – that Maine property taxes were among the lowest in the United States – found its way into the Bangor Daily News story on the study and may have inspired disbelief in more than a few Mainers.

But the next day the Washington-based Tax Foundation issued a correction that showed the amount of Maine property taxes collected per capita was the sixth highest in the United States. As a percentage of income, those taxes were the most severe in the country. Faith restored, but in a tenet few want to pay tribute.

Foundation spokesman William Ahern said a misplaced decimal point had caused the mistake. The change did not affect the newer report’s finding that Maine’s overall state and local tax burden, as a percentage of individual income, was second highest in the United States.

The estimates were the most recent in a string of indices and studies, most of them geared toward businesses, which show Maine among the most heavily taxed places to live. The Tax Foundation figures collect a broad measure of property, sales, income, corporate and other taxes, but showed similar results.

“There is pretty much unanimity; you don’t see any conflicting information,” said former Republican state Sen. Phil Harriman of Yarmouth. “We are a low income, high tax state.”

Harriman, a Portland investment manager, is a member of Taxcap Yes!, a political action committee recently formed to support the ballot initiative sponsored by the Maine Taxpayers Action Network. That measure supports a reversal of assessed property values to 1997 levels , a 1 percent cap on the mill rate and a maximum 2 percent increase in a property’s assessed value each year.

The constitutionality of that initiative was challenged in the Maine Supreme Judicial Court by Attorney General Steven Rowe. A decision is due this week.

An initiative passed by voters, sponsored jointly by the Maine Municipal Association and the Maine Education Association, faces a second, stand-alone vote in June. The measure aims at education costs as the principal driver of property taxes. If passed, it would require legislators to almost immediately honor the promise made in the state in 1984 to fund 55 percent of local education costs. The state instead pays a varying amount of local school costs, the level currently hovering around 42 percent.

“More than anything, we were trying to get stability in this partnered way of funding education,” MMA spokesman Michael Starn said, “because if the state doesn’t live up to its share, the difference gets made up with property taxes.”

A bipartisan working group of legislators is negotiating with Gov. John E. Baldacci’s office on a third approach, aimed at stepping the state up to paying 55 percent of local school costs.

Among the many who agree tax reform is needed is Richard Larson, who teaches economics and business studies at the University of Maine at Machias. Larson said he agreed with the Tax Foundation findings.

“Looking at all taxes per se, I would have to say their assessment was quite correct,” he said. “We don’t have enough private sector and have too many government employees paid by not enough taxpayers, which is forcing the taxation per capita out of line.”

Larson said the only long-term fix would come through attracting more private industry, expanding the economy and broadening the tax base.

Harriman points out that Maine has had budget surpluses as recently as 2000, however, and sees the most direct return to those surpluses through changing the behavior of legislators.

“They’ve talked about the need for tax relief, but really what they are demonstrating is an insatiable appetite to find revenue,” Harriman said. “The people they represent are trying to tell them: The crushing tax burden they’ve created is the reason that our economy is not doing well.”