November 24, 2024
Column

Question 1 and the politics of property taxes

Maine should rely on broader and more equitable sources than property taxes to fund public schools. Nonetheless, I will vote no June 8 on Question 1 mandating that the state immediately increase its share of the educational funding load to 55 percent. Even if the measure resulted in reductions in property taxes – by no means certain – it would not assure that these reductions were targeted to those most in need. And even if relief reached the most deserving citizens, many of those same citizens would suffer from offsetting cuts in state programs.

This reform inadvertently imposes new burden on those it purports to help. And that is where this whole mess started. Property taxes and education funding are contentious issues because of a persistent effort at all levels of government to pass the responsibility for taxation down to the most vulnerable. I haven’t a clue as to how one would steer fair property tax relief through our state legislature. Nonetheless, there are some broader questions citizens should entertain as they vote for their representatives in Augusta and Washington.

At the same time that states have been suffering from a prolonged economic slowdown and diminished tax revenues, Washington has slashed taxes – primarily on the wealthy – and reduced support to the states. Changes in federal policy have also imposed new burdens on states. Health care regulations now discourage long-term hospitalization and encourage use of prescription drugs. The costs generated by poor elderly citizens in hospitals fall within the province of the federal government’s Medicare program, while long-term care and prescription drugs are part of Medicaid, about half of which is a state responsibility.

The Center for Budget and Policy Priorities estimates that Medicaid costs generated by changing federal policy impose a $172 million obligation on Maine, two-thirds of the sum it would take to fund Question 1. These numbers become starker when the implications of No Child Left Behind and federal requirements regarding special education are considered.

Over the last quarter century, presidents of both parties have taken credit for cutting taxes and reducing the size of the federal government. Yet the federal government is the one entity that can run deficits in hard times and has the capacity and responsibility to put a floor under basic health, education and research needs faced by all states. Even many Republican governors, mayors and town councils have found that they cannot do without most functions government performs, from schools to prisons to transit maintenance.

Desperate efforts have been made to control the costs of those services through privatization, means testing, wars on municipal unions, and new demands of clients, but these efforts have had limited success and imposed new burdens on many working-class citizens. Even conservatives have often been forced to resort to higher local taxes. Here in Maine, where counties and municipalities cannot enact sales or income taxes, the property tax has been the only vehicle.

Now, however, the grass roots are biting back. Property taxes are good vehicles for grass-roots populism of both left and right. The tax is large, depends on forces over which the average citizen has no control (local neighborhood valuations) and potentially can drive one from his or her lifelong residence.

Progressives need to enter this debate by embracing property tax reforms that target those most in need. Twenty percent of Maine property taxes are paid by out-of-staters. Indiscriminate property tax relief will include many affluent owners of vacation homes, who are already beneficiaries of generous Bush tax cuts.

Taxpayers for a Fair Budget’s proposal to expand the circuit-breaker program so that no Maine citizen pays more than 5 percent of income in property taxes and to fund that with a more broadly based sales tax seems sensible to me. Nonetheless, we should not forget these issues when we vote for our U.S. senators and representatives.

Oliver Wendell Holmes once famously remarked that taxes are the price we pay for civilization. Unfortunately today that price is distributed unfairly. And today’s civilization – workplaces, schools and health care systems – leaves many on the outside and imposes intrusive restrictions on others. The political leaders who are civilization’s guardians are increasingly isolated. Anger grips much of our politics. Consequently some property tax “reforms” not only alter one tax but also hamstring future legislatures, either through rigid tax caps or spending limitations.

These are premised on a breathtaking assumption that former state economist Charles Colgan has nicely characterized as the conviction that we already know everything that needs to be known and are doing everything that needs to be done. Unfortunately, absent a stronger commitment both to ongoing public scrutiny of our tax system and of the public and private bodies it sustains, such prescriptive agendas will increasingly dominate our politics.

John Buell is a political economist who lives in Southwest Harbor. Readers wishing to contact him may e-mail messages to jbuell@acadia.net


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