No real relief

in sight
The Legislature has one month to craft a tax package.

AUGUSTA – Republicans won’t negotiate tax relief without a constitutional spending cap.

The House speaker won’t support a plan that eliminates the Homestead program.

Most lawmakers oppose any plan to cap property taxes.

Of the many changing plans aimed at property tax relief, only one is expected to emerge with the stamp of legislative approval in the coming weeks.

It is likely to be a hybrid, coupling increased school funding with rebates targeted to low-income homeowners. It should also impose local and county spending caps while easing the business equipment tax, said Rep. David Lemoine, D-Old Orchard Beach, chairman of the Taxation Committee.

One thing is certain, he said. “This will be an 11th-hour package.”

This anticipated package of compromise legislation is aimed at heading off two specific citizen referendums. If passed by voters, critics say those citizen measures would saddle the state with huge deficits that could only be overcome by tax hikes or crippling delivery of local services, or both.

One initiative, championed by Topsham activist Carol Palesky, would cap property taxes at 1 percent of assessed value.

Maine’s Attorney General’s Office testified before the Taxation Committee last week, expressing doubt that the initiative would pass judicial muster if put to a constitutional test.

Another referendum question, spearheaded by the Maine Municipal Association, will ask voters whether the state should be required to pay 55 percent of all K-12 public education costs, plus foot the total bill for special education.

Horse-trading relief

One bipartisan group hopes to defeat the MMA proposal by drafting legislation that would achieve the aim of 55 percent state funding of education, but phased in gradually instead of all at once as originally envisioned by MMA.

The so-called working group, created by House Speaker Patrick Colwell and Senate President Beverly Daggett, has been meeting with representatives from MMA and the Maine Education Association to craft a funding formula that would ramp up state aid to education steadily each year until the 55 percent commitment is reached.

Mike Starn, spokesman for MMA said that concept is “acceptable” to his organization. “We could buy into that,” he said. If enacted by the Legislature, Starn said MMA would back off its campaign to pass the citizen initiative by acknowledging publicly that the matter had already been addressed to their satisfaction.

“MMA and Palesky I would guess are neck and neck right now with the public and I would give Palesky a very good shot at passing if we don’t do something with the Legislature,” said House Minority Leader Joseph Bruno, R-Raymond.

Colwell said he is working with various interest groups in an effort to strike a balance. “And we’re working with Republicans to try to figure out a way we can get to ‘Yes’ here. Is this easy? No. It’s very difficult. But I think there are key components here.”

If given a “reasonable” plan, voters will see the wisdom in the Legislature’s tax relief solution and will reject Palesky’s proposal, Colwell said. “They’ll say, ‘You know what? This does work. And we won’t need the Palesky initiative.'”

Colwell is optimistic the Legislature can pass a tax relief package by the end of the session, scheduled by law to adjourn just one month from now.

There are many ideas that could be wrapped into the tax relief package.

Cap or rebate?

In addition to the citizen referenda and less formal proposals currently circulating at the State House, two proposed bills feature an expansion of the state’s popular Circuit Breaker program.

A couple of the plans seek to cut taxes by forcing lower spending or inducing reductions through incentives.

Gov. John Baldacci’s proposal would provide additional money to communities that team up on regional cost savings. It also would impose spending caps on municipal and county budgets tied to the income growth rate.

Republican legislators are pressing for a cap on state government spending by way of a constitutional amendment that could only be overridden by a legislative super-majority.

“I don’t have a problem instituting constitutional caps,” Baldacci said recently, as long as they don’t affect the state’s bond rating.

He planned to meet with Republicans today on the subject. Lemoine was less keen on a constitutional cap, calling chances of its passage “slim.”

Some lawmakers have formed ad-hoc bipartisan groups in an effort to strike a compromise tax relief measure. One such group, the so-called Coastal Caucus, is exploring ways to limit one’s property tax burden to a certain percentage of one’s income. The group also has considered authorizing municipalities, through a constitutional amendment, to freeze property values for purposes of tax assessment similar to Palesky’s proposal but only for land, not buildings. They crafted a committee amendment due out Tuesday.

Paying the bill

As studies continue, negotiations are under way, Colwell said. His own bill targets most relief to low-income homeowners and senior citizens, doubling the size of the Circuit Breaker program with $23 million more and pumping $21 million more into an expanded Homestead program.

To help cover the added cost, Colwell proposed hiking “sin” taxes, such as cocktails, and lifting the sales tax exemption on lottery and horse race tickets.

Other plans recommend a sales tax hike and/or meals and lodging tax increases.

Baldacci has held firm in his resistance to tax hikes or new taxes. His plan relies on shifting money from other programs and a new Powerball lottery.

Bruno said Republicans would not negotiate tax relief without a pledge from Democrats committing to a constitutional spending cap.

Colwell said he would consider the Republicans’ proposal, saying legislation forcing all levels of government to hold the line on spending is necessary. “I would certainly have a conversation with them, yeah. I support the notion of living within our means.”

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