Official: Tax plan offers relief in ’05 Baldacci proposal eyes spending cuts

AUGUSTA – Gov. John Baldacci’s tax relief proposal would cut property taxes by 8 percent in the first year and bring the state’s overall tax burden close to the national average within a decade, an official said Friday.

The total tax burden for Maine residents would decrease from 12.8 percent in 2004 to 10.7 percent in 2015 under the governor’s proposed caps, said Michael Allen, director of economic research for Maine Revenue Services.

“This decrease would move the state very close to the national average tax burden,” Allen told the 15-member Joint Select Committee on Property Tax Reform.

The state’s property tax burden as a portion of Maine income would drop 7.1 percent in 2006, 18.4 percent in 2010, and 24.5 percent in 2015, he said.

To calculate the estimate, Allen assumed a municipal growth rate of 2.75 percent plus a property growth factor, an idea the governor borrowed from the alternative plan promoted by the Maine State Chamber of Commerce.

Allen said both proposals would require deep cuts in state spending.

Baldacci is expected to put forth his two-year budget on Jan. 7.

The legislative tax review committee began digesting the details of the governor’s package this week and has not yet reached the stage at which policy decisions are made.

An important provision in Baldacci’s bill is to broaden Maine’s circuit-breaker program, which first appeared in 1972 to provide tax relief only to the elderly.

It was expanded in 1988 to include nonelderly.

In its present form, it provides property tax rebates for single-member households with incomes below $30,300 and $46,900 for multiple-member households.

Baldacci seeks to raise those standards to $50,000 and $75,000, respectively.

Another provision seeks to create a property tax deferral program available to homeowners whose property taxes are still in excess of 6 percent of income after the circuit breaker is applied.

Amounts of taxes deferred would have to be repaid with interest.

The Maine State Housing Authority would issue bonds to finance the program.

Baldacci’s bill also includes caps on municipal, county and education spending, an increase in the state’s public education subsidy to 55 percent and incentives to municipalities and schools for cost-cutting steps.

A proposed constitutional amendment would allow municipalities to freeze land values of principal residences at current use levels.