Tax cap foes see loophole in question Language in referendum negates cuts, analysis says

WATERVILLE – A loophole in the tax cap referendum question on the Nov. 2 ballot would enable local governments to avoid the deep spending cuts they fear would result from the initiative, a legal analysis by opponents says.

A memorandum for the Maine School Management Association cites language in the question that could mean each layer of local government would be entitled to 1 percent of a property’s value.

It suggests that the wording of the initiative could allow each town, school district and county to tax 1 percent of property value, meaning the owner of a $150,000 home could pay as much as $4,500.

The question’s vague language could force the Maine Supreme Judicial Court into interpretations of the law that are different from what most people are thinking, said Richard Spencer, a Portland lawyer who helped write the memorandum.

A tax professor at the University of Maine School of Law, Orlando Delogu, questioned the interpretation in the memorandum. Under Maine law, only municipalities have direct taxing power, even though cities and towns collect taxes on behalf of schools and counties, Delogu said.

But he added that the Legislature could give counties and school districts that taxing authority as a way to avoid the cap’s effects.

Officials for Tax Cap YES!, the campaign committee for passage of the referendum, declined to comment, citing a lack of legal knowledge.

An analysis released a month ago by University of Maine economists says the budgets of municipalities would have been underfunded by $688 million if the tax cap had been in place last year, resulting in losses of millions of dollars to pay for municipal services.

The same report said that in dozens of municipalities where tax rates are already under 1 percent, property owners could end up paying more under the measure.