PROPERTY IMPROVEMENTS

The lesson of property-tax relief over the last two years in Maine is that residents badly want it, but they will not accept legislation that jeopardizes the future of the state. The first bill lawmakers are likely to see next session is a version of the former LD 2, a constitutional amendment promoted by Gov. John Baldacci. The bill is well-intentioned and contains the beginnings of some good ideas, but like the Palesky initiative and TABOR, it will fail unless improved in a couple of ways.

The governor would freeze the values of primary homes owned by year-round residents until a sale occurs, with the new owners paying a rate based on a valuation update. This may provide a break to longtime homeowners, but because a community is free to change its mill rate, it does not guarantee tax relief. Instead, it is more likely to shift tax costs onto businesses, camp owners, and young families moving into Maine – or back into Maine, if they grew up here.

The proposal also shifts the tax burden away from the state-run Circuit Breaker program and directs it back to municipalities. This would create some unfortunate results, such as having two Maine families living on the same road in similar homes with the same ability to pay but paying very different tax bills. People moving within Maine would be noticeably harmed. Why would the state financially punish someone from, say, Medway because she had to move to Ellsworth to find work?

There are better alternatives to this, ones that would fit well within the intention of LD 2, delivering meaningful tax relief to those most affected by sky-high tax increases while giving local government greater control over providing these breaks. For instance, a bold expansion of the Circuit Breaker program, which reimburses taxes up to $2,000 for those with tax bills equal to 4 percent or more of their income, could reach more people with greater impact. By raising the tax break to $6,000 or $8,000 and making the application more easily available or even part of a property-tax bill, the program would reach more people to greater effect. While it is true that this couldn’t be accomplished without technical changes – municipal and state revenue services would have to work more closely – the point is to streamline the process for residents and target relief to those who need it most.

A revised LD 2 additionally could provide local government with the option of limiting property-tax increases so that communities with highly disparate tax amounts – for instance, those with waterfront and inland homes – could take limited steps to even out costs. This would put a finer edge on the governor’s proposal and give the communities that would be affected a greater influence on their own tax decisions.

The Legislature has twice rejected forms of the bill the governor is supporting and will likely reject it again unless it changes substantially. Maine, thanks to legislative work over the last couple of years, has a strong but underfunded Circuit Breaker program. The answer lies there.