Lawmakers will meet Thursday in a special session. One of the two jobs on the agenda is to approve a “tax reform” plan that would be added to the ballot this November to compete with an initiative put forward by the Maine Municipal Association. Neither plan gives us cause for applause.

The MMA’s referendum wants to force the state to provide 55 percent of the funding for education. The state currently pays about 43 percent of the costs, leaving localities to make up about $260 million a year.

The proposal has good intentions. By statute, the state is responsible for the 55 percent, but has avoided its obligation. Localities must fund the shortfall through property taxes.

The MMA plan, however, does not indicate how the state should raise the money and does not require localities to reduce property tax rates accordingly.

The governor’s plan would limit local spending increases, change the school funding formula and phase in increased funding for education over five years.

Changes proposed by the MMA and the plan bandied about by the governor and legislators charade as tax reform. They are not.

MMA merely wants to switch around which tax dollars pay for education. If the burden is removed from property taxpayers, it will be shifted to those who pay income taxes and sales taxes. While property taxes could – might – go down, other taxes would have to increase or else the state would be forced to cut funding for programs. By programs, we mean roads, the university system, parks, libraries, health care and a host of others.

The state of Maine has three primary sources of revenue from taxes. According to the Maine Center for Economic Policy, the state brings in about 19 percent of its revenue from property taxes, 18 percent from income taxes and 17 percent from sales taxes. Twenty-three percent comes from the federal government.

This three-legged system is a good idea. Oregon does not have a property tax and California property taxes are greatly limited. In boom times, income and sales taxes provide a windfall for these states. But in down times, when people earn and spend less, revenues fall dramatically. The budgetary pain Maine has faced is slight compared to the problems caused in states that self-limit their revenue streams.

Real tax reform would require a comprehensive examination of how the state gets its money. Reform, alone, does not guarantee that residents will pay less in taxes. If done properly, tax reform would make the system more balanced. There are only two ways to reduce tax load: cut spending or increase the tax base, which requires an economic recovery that creates jobs and increases wages.

As residents consider tax alternatives, consider this: Non-residents, again according to the MCEP, pay 12 percent of property taxes, about $165 million a year. They pay just 8 percent of sales taxes and 5 percent of income taxes. If the tax burden shifts from property to sales and income, more of those new bills will stay here with us.

Whether supporters back the MMA plan or the governor’s alternative, they should realize this is not tax reform. It’s a shell game of shifting responsibility.


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