LOOK BACK AND LOOK OUT

Gov. Baldacci’s tax-cap resolution, released last week, partly addresses one of the primary criticisms against it, but the plan continues to lack a good argument for its existing at all. Majority legislative Democrats will have a hard time rejecting their party leader’s plan; they should instead offer an alternative, one that provides simplified tax breaks for some Maine residents and lowers spending levels to benefit all residents.

The resolution, LD 276, would freeze valuation of primary residence land, plus inflation, but recoup the previous five years of avoided taxes, plus interest, when a property is sold. The constitutional change would not affect school funding levels, state revenue sharing or county taxes. The major alteration in the plan from what the governor has been discussing since his re-election is the five-year recovery of avoided taxes.

That change reduces the problem of tax shifting that would occur as long-term residents saved money and new residents made up the cost. But the added tax also discourages house sales, pushing the average length of home ownership beyond the 2000 median of 11 years, well beyond the five-year mark in LD 276, and preventing municipalities from getting back all the lost revenue.

Other states burdened with the cap plan could give Maine more insight on this problem – one state, Florida, has been trying for more than a year to solve the problem of long-term residents getting hit with much higher taxes when they try to move. It’s easy to imagine, five or 10 years after the tax cap passes, residents protesting the five-year tax penalty and seeking a second constitutional amendment to remove it.

The benefit of the governor’s bill is that it protects some residents who are land rich but cash poor. It does so, however, by adding a layer of accounting to every town in Maine, shifting costs to people who have recently moved and adding to the burden of businesses, which also would pick up some of the cost. Even if the governor’s solution worked, the problems it would create outweigh its benefits.

The circuit breaker program, added to the state tax form, is a simpler, targeted way to help the small percentage of people actually in danger of losing their homes because of rising valuations. But just as important is lowering overall spending within towns by finding ways to incrementally lower the caps now in place and passing at least 90 percent of the increased state funding for schools back to property taxpayers. These changes, also supported by the governor, would in just a few years create a more affordable place in which to live, although they are not as politically dramatic as the tax-cap resolution.

Credit the governor for trying to lower taxes, but he is proposing that Maine create a complicated answer to a fairly simple problem, one that can be addressed through the mechanisms already in Maine statute. If, as he has said before, residents haven’t seen the benefit of these existing programs, opponents on this issue can pledge to begin a major thank-you campaign if he chooses this simpler, more effective route.