Foes eclipse fans of Baldacci’s tax relief bill

AUGUSTA – Gov. John E. Baldacci’s tax relief legislation absorbed a number of direct hits Tuesday during a daylong public hearing on the proposal that stretched into the evening.

Critics ranged from teachers to lobster fishermen and far outnumbered proponents appearing before the Legislature’s 15-member Joint Select Committee on Property Tax Reform that is reviewing the tax relief package that has been presented as two bills, LD 1 and LD 2. The largely supportive sentiments offered by the bills’ sponsors, House Speaker John Richardson, D-Brunswick, and Senate President Beth Edmonds, D-Freeport, were quickly eclipsed by an outright rejection of the Baldacci plan by Geoff Herman, director of state and federal relations for the Maine Municipal Association.

“There is no tax reform from my perspective in this legislation,” Herman told the panel.

Baldacci’s multipronged legislation was written in response to the statewide June 8 Question 1A referendum vote that favored an MMA citizen initiative calling for the state to fund 55 percent of local education costs instead of the current 43 percent. The tax plan also features tools to decrease the state’s overall tax burden as a percentage of personal income from 12.6 percent to about 10.65 percent within 10 years.

Key points include:

. A four-year phase-in of additional state revenues to bring the state’s share of educational funding to 50 percent by the end of the next two-year budget cycle, which concludes June 30, 2007, and to 55 percent by the close of the budget cycle that ends June 30, 2009.

. Policies ensuring that no Maine residents will pay more than 6 percent of their income in property taxes through new state circuit-breaker and reverse mortgage loan programs.

. Statutory caps for state, local, county and school budgets based on average personal income growth.

. A constitutional amendment giving municipalities the option of valuing homestead land at current use levels to curb the escalation of taxes for high value property.

Herman told the committee members that the governor’s bill changed the citizen initiative voters approved by removing the language that gave the initiative precedence over any other law.

“Question 1A was an entitlement, and the entitlement language is very important,” Herman said. “Instead of being entitled to the 55 percent state funding as defined under 1A, [the law] becomes an entitlement to whatever the Legislature feels the voters should be entitled to.”

He added that, if LD 1 were to pass as written, it would eliminate the ability to legally enforce the citizen initiative approved by the voters. Herman also challenged the administration’s prediction that the legislation would decrease local property taxes by 8.6 percent and slammed Baldacci’s spending caps for offering exemptions to the state that were not extended to county and municipal governments.

Observing that the governor’s bill provided exceptions for the state to exceed spending caps in six circumstances, including unfunded or underfunded federal mandates and loss of revenue, Herman said it was “remarkable” that the bill seemed to allow a loophole for anything the Legislature might determine to be an “exceptional circumstance.”

“Our policy is what’s good for the goose is good for the gander,” Herman said.

Herman’s remarks clearly raised the hackles of panelists like Sen. Joe Perry, D-Bangor, who questioned the campaign that helped Question 1A win approval last June.

Perry said the MMA recently chose to describe the 1 percent tax cap plan on the November ballot as “flawed,” but failed to acknowledge in June that its suggested method of financing Question 1A was to extend the sales tax to a number of currently exempt services, including residential electricity, residential gas and auto repairs.

“I would question whether voters would have passed 1A had they known [about the taxes] at the time,” Perry said. “At least Palesky was clear.”

Kathy Littlefield, first selectman for the town of Waldo, said the list of spending cap exemptions the state provided for itself was another example of the continuing message Augusta has sent to municipalities over the past few years.

“The state rules and, as I see it, the rest of us drools,” she said. ” … [With this legislation] you have been handed the same old deck of cards that’s just been shuffled a little differently with maybe a couple of extra jokers thrown in. What you need to do is throw that old deck away and ask for a new one.”

Still, the value of taking a measured approach to tax relief was not lost on some members of the audience. Robert Ziegelaar, president of Telford Aviation in Bangor, said Maine must be competitive in order to attract new out-of-state and international business ties as well as provide incentives for businesses to remain here.

“We don’t have to be the lowest-taxed state in the nation, but we also can’t afford to stand out in terms of cost,” he said. “The place to start is with Governor Baldacci’s proposal. Another tax referendum with misplaced aspirations, disruptive debates and, most of all, economic uncertainty is not what Maine needs now. We believe the governor’s package represents a reasonable approach to dealing with the macro-economic tax problems that confront our state.”

Rosaire Pelletier of Madawaska said spending caps and educational funding reform are the primary tools needed to reduce the state’s tax burden.

“The governor’s bill does this by striking the right balance,” he said.

The committee is scheduled to continue working on both bills today and has adopted a self-imposed deadline to complete its work by Jan. 14.