‘SNARL OF INEQUITIES’

Only about 10 percent of Maine homes, says the State Planning Office, are sold to people from out of state, a population that is being targeted by Gov. John Baldacci as a source of higher revenues under a proposal to cap property taxes. Unfortunately, his plan would also catch the 90 percent of home buyers who are Maine residents, and that’s a problem.

Gov. Baldacci’s tax-cap constitutional amendment would lead to legislation that would freeze the value of a home at the time of purchase; municipalities would make up the lost tax revenues they need to operate by raising taxes on businesses, second homes and newcomers. The plan would certainly lower the tax burden for Maine residents who stayed put, but it would also raise it for others and create inequities that would divide communities.

Maine doesn’t have to guess about these outcomes. It can look at Florida, which created “Save Our Homes” in the mid-1990s. Save Our Homes doesn’t take the drastic step of freezing property valuations, but it does limit them to 3 percent annual increases. Last year, the Sarasota Herald-Tribune examined the effects of the measure a decade after it began. The results, overall, are not encouraging.

For instance, one of the most noticeable results of the cap is that “new owners in modest neighborhoods often pay the same tax bill as millionaire homeowners near the beach.” While Tyco International President Dennis Kozlowski was facing charges of looting his company, he was getting a tax break in Palm Beach worth $40,000. Meanwhile, says the newspaper’s investigation, “those hit especially hard are parents with growing families who want more space or empty nesters who want a smaller home after the children grow up. People who must move for a job can end up saddled with a tax bill that is double or triple what they paid on their old home.”

Some other findings:

. The Florida constitutional amendment didn’t reduce increases in property taxes; it shifted them. Based on the strength of the rising value of property there, officials could lower the tax rate and still collect more in taxes, though only from those not protected by the amendment. And with longtime residents – those who keep an eye on government – helped by the amendment, one Florida professor said the measure “has, to some extent, taken property taxes off the table and created a layer of protection for local officials,” according to the Herald-Tribune.

. Regions away from the coast can be cash-starved. Without the rush of new buyers inland, those counties with stable populations of homeowners have seen their inflation-adjusted revenues decline each year, leaving government short of funds. Meanwhile, coastal communities are flush with cash from new buyers and new growth.

. The Herald-Tribune’s conclusion: “[T]he program that was supposed to save little old ladies from being forced from their homes has turned into a cash cow largely for the rich. It transformed a system that made sense – where the most valuable property got taxed the highest – into a snarl of inequities.”

Gov. Baldacci wants to bring this plan to Maine for a simple reason: It would provide many residents with a tangible reduction in tax burden. It does so by getting someone else to pay, and the tax someone else pays is always the most desirable kind of tax.

Florida has absorbed this inequity in part by growing quickly. Its latest population increase ranked it fourth in the nation and that was a decline from previous years. At 1.8 percent, it is down to growing at only six times Maine’s rate, according to recent figures from the Census Bureau. But without major growth, Maine would largely shift that burden among its residents and make it harder for former residents to return.

The governor doesn’t like the property tax relief targeted at those with an especially high burden, through the state’s Circuit Breaker program, because not enough people recognize the break is available and making it substantial enough to matter is expensive. He is right that these issues must be solved before the Circuit Breaker becomes more effective. But solving them is a better option than creating a new and elaborate system of winners and losers through a property-tax amendment.

No one wants to see Maine experience endless rounds of referendums over property taxes, but dividing the state against itself or punishing residents for moving to another part of the state, whether to retire or to look for work, isn’t the solution either. The tougher challenges of lowering the overall cost of government and providing breaks for those who have high property-tax burdens are the less dramatic but much fairer options.