Chamber unveils cap alternative State group hopes plan will ease Palesky support

AUGUSTA – Maine State Chamber of Commerce President Dana Connors unveiled his organization’s two-prong solution for decreasing the state’s high tax burden Thursday, hoping to extinguish support for a statewide tax cap proposal on the Nov. 2 ballot.

Connors proposes a system that would impose caps on taxes and spending at the state, county and municipal levels in an effort to move Maine down from among the highest-taxed states in the country to somewhere “in the middle of the pack.”

The chamber advanced its plan as an alternative to the tax cap proposed by Carol Palesky and cap proponents like “TaxCap Yes!”

The fall referendum question would limit municipal taxes to $10 per $1,000 of assessed values in place during the 1996-97 fiscal year. Increases in taxes would be restricted to 2 percent per year of assessed value as long as the property remained in family ownership.

State, municipal and education officials have denounced the cap as a “meat ax approach” to tax reform that would gut municipal services.

But tax cap proponents maintain the ballot question is the only way to stem spiraling taxes after the Legislature failed to reach agreement on tax reform earlier this year.

Connors said Wednesday that voters who are inclined to support the tax cap in the absence of anything better should be intrigued by the chamber’s plan.

“I have good news for you today, there is an alternative,” Connors said. “You don’t have to support the Palesky proposal just to send a message. You can support a good law that will not just shift taxes around, one that actually achieves real and permanent tax relief for Maine citizens.”

The chamber’s Maine Taxpayer Relief Act of 2005 would:

. Cap growth of state government spending at the rate of real personal income growth, not to exceed 2.75 percent annually, for so long as Maine’s state and local tax burden is among the nation’s highest.

. Cap local, school district, and county spending growth at the same 2.75 percent level, with allowances for new development.

. Make certain that additional state funding of local education costs as envisioned under the Question 1 formula approved by voters in June would reduce local property taxes on a dollar-for-dollar basis to provide more state school aid that could immediately lower local property taxes.

. Reserve revenue surpluses – money that comes into government but can’t be spent because of the act’s spending cap – and dedicate the vast majority of those dollars to a more prosperous Maine through lower taxes.

. Repeal the current Homestead Exemption Program and provide immediate property tax relief to those who need it most through the creation of the Maine Home Tax Cap, which would assure that virtually no Maine resident will pay more than six percent of his or her income in property taxes.

The chamber, which represents more than 1,200 businesses in Maine, has filed with the Maine Secretary of State’s Office to place its proposal before the voters in June if the next Legislature fails to approve its plan.

Either legislative approval of the plan or an affirmative decision by Maine voters in June would have the effect of repealing the Palesky tax cap if the question wins in November.

Connors said if the chamber’s plan had been in place since 1993, Maine’s tax burden would be in the middle of American states today, rather than at the top.

“The Palesky proposal could not have accomplished this because it just limits one type of tax at one level of government,” he said. “The California model (on which Palesky is based) has shown that when one tax is limited, others rise. California today has among the highest income and sales tax rates in the country.”

Reaction to the chamber’s plan was mixed. Gov. John E. Baldacci said he was encouraged by the organization’s opposition to the fall tax cap question but wanted to reserve comment on the proposal until he had a chance to study the details.

Legislative leaders were just familiarizing themselves with aspects of the chamber’s plan Wednesday. Senate Republican Leader Paul Davis, of Sangerville, said the proposal’s arrival seemed slightly premature.

“Shouldn’t we wait to see if Palesky passes before we start talking about repealing it?” he asked.

Tax cap proponent Phil Harriman of TaxCap YES! said the chamber plan was nothing more than a “rehash” of other ideas that have been debated and rejected by the Legislature.

“How can we assume the Legislature is going to adopt these ideas after they’ve already rejected them?” he asked. “These [legislators] are now asking people to vote for them because they’re for tax relief and education and a strong economy. But the trail they’ve left behind them shows that incomes are going down and taxes are going up and it’s getting harder to find a decent job.”