AUGUSTA (AP) – A combination of tax caps and spending limits to state and local governments are key components of a tax-relief proposal unveiled Thursday by the Maine State Chamber of Commerce.

The chamber is advancing its package as an alternative to the tax-cap proposal on the Nov. 2 ballot, saying the Palesky proposal is confusing and extreme. And chamber leaders vowed to take the issue to public referendum next year if the Legislature doesn’t buy into it.

Specifically, the chamber’s proposal would:

• Cap the growth of state government spending at the rate of real personal income growth, not to exceed 2.75 percent annually, as long as Maine’s tax burden is among the nation’s highest.

• Cap local, school district and county spending growth at a similar level, and create a revenue surplus account, with most revenues directed at tax relief.

• Provide that virtually no Maine resident pay more than 6 percent of their income on property taxes.

• Mandate that every dollar the state gives towns and cities from last June’s Question 1 be spent to reduce property taxes.

On Wednesday, Gov. John Baldacci praised the chamber for declaring its opposition to the Palesky tax cap. “I think the chamber is showing leadership in coming out in opposition,” Baldacci said. “To me it’s an extreme proposal.”

The chamber’s plan is “reasonable and creative” and deserves careful consideration, said Dennis Bailey of Citizens United to Protect our Public Safety, Schools and Communities. He called it a “far more realistic and responsible proposal” than the tax cap.

But tax-cap advocates countered that the chamber is missing the message that property tax payers are fed up.

“Apparently even the state chamber doesn’t understand that government spending is way out of line with the taxpayers’ ability to pay,” said Jen Webber, spokeswoman for TaxCap YES! “That is why so many people support the 1 percent property tax cap.”

Carol Palesky of Topsham, who brought the tax cap to the November ballot, said the chamber’s plan “won’t work. It wouldn’t be enacted until 2005 or 2006. People can’t wait that long. Some people are right on the edge of having their property taken.”

And the chamber’s proposal relies on state lawmakers and the governor, who have not acted, Palesky said. “They’ve had 15 years to do something, and they haven’t.”

Palesky’s tax cap proposal seeks to limit property taxes to $10 per $1,000 of assessed property valuation, based on values in 1996-97. It also would limit assessment increases to 2 percent a year while the property’s ownership remains in a family.

“Most of the people that I’ve talked to understand that it’s a bad law, that it will result in massive reductions in services in our communities and negative impacts in our schools,” chamber board Chairman David Brenerman said. The plan would decrease taxes and spending locally, but would cause state taxes to rise “significantly” to make up the difference in lost local revenues, he said.

Chamber President Dana Connors said the chamber’s plan will go to the Legislature in January. If lawmakers do not act on it, the chamber will seek to place the plan on the ballot as a statewide referendum, in either June or November 2005, Connors said.

The threat of a referendum “is insurance, leverage” that state lawmakers act, Connors said.

Even if the Palesky tax cap passes in November, the chamber would proceed with its referendum. If approved, the chamber referendum would replace the Palesky tax cap, Connors said.

“If you think Palesky is a bad law and you do want to send a message, we ask that you sign our petition,” Connors said. The chamber represents nearly 1,200 Maine businesses.

If the tax cap is approved this year, Baldacci cast doubt on the ability of state government to fill revenue voids for cities and towns. “There isn’t that much money hanging around,” the governor said.

On the Net:

Maine State Chamber of Commerce: http://www.mainechamber.org/

Tax Cap Yes: www.taxcapyes.com

Bonnie Washuk of the Sun Journal contributed to this report.