Commentary

Thoughts From Augusta
By Representative Lois Snowe Mello

Real Tax Relief Starts with Spending Reform

A common misconception is that Maine's highest in the nation tax burden is caused by a lack of revenues. Quite contrary, Maine revenue grows every year. The reason taxes are so high is because the Legislature spends more money than it has, forcing tax increases. In response to this spending problem, the Republicans have proposed a bold, forwarded looking plan that addresses the out-of-control spending.

The most important first step in any meaningful tax relief is limiting government spending. Lost in much of the debate over taxes is the driving force behind them - spending. High taxes are the result of excessive spending.

In order to limit government spending, Republicans propose a constitutional amendment that would cap the growth in spending for state, county and municipal government to the rate of inflation plus the percentage growth in population. Government spending has grown more than twice the rate of inflation. If a spending growth cap had been enacted 10 years ago, spending in Maine would be about $400 million less today. That is roughly $320 dollars for every person in the state-or about a 15% reduction in the tax burden.

There is debate whether a constitutional spending cap is necessary. Democrat legislators claim a statutory spending cap would do the trick, but I politely disagree. A statutory cap is equal to shopping with a credit card - you may have a budget, but if you exceed that budget there is a credit line available to cover the excesses. A constitutional cap is equal to shopping with a debit card - you have a budget and you must follow that budget or you run out of money. One only has to look at the $1 billion structural budget gap the state faces to understand how a little overspending here and there leads to BIG problems down the road.

Republicans also introduced a plan that would make it harder for the legislature to raise taxes and fees. Currently the legislature needs a mere majority vote to raise taxes or fees. The Republican plan only allows the legislature to raise taxes and fees when 2/3 of the House and Senate agrees to the increase. Requiring a super-majority would ensure that a proposed tax increase is truly necessary.

With the spending cap in place the Legislature can provide tax relief. By limiting government growth, the Republican tax relief plan dedicates excess revenues to tax reduction. Every year state revenue increases from the previous year. However, the Legislature has continually spends those increases. Instead of expanding government spending, Republicans propose that increase in state revenue be used to lower Maine's income tax burden.

In a multi-step reduction plan, immediate tax relief would go to the neediest 40% of Maine's citizens by eliminating the income tax for these families. They make up less than 2.5% of total income taxes paid. Once this reduction is achieved across-the-board reductions in income tax rates would be implemented over time as the spending cap frees up additional revenues. At least 50% of the excess revenues would be used to accomplish this gradual --across the board reduction.

Additionally, excessive property taxes are a growing problem. The Republican plan will provide real property tax relief so that Mainers can afford to stay in their homes. This would really help our senior citizens, those who are disabled and those on a fixed income by assessing property at the most recent sale price.

The property tax needs predictability, stability and fairness injected into the formula. When property is purchased, the sale price would be the "Base Property Value," which would be established as the basis for future property tax bills. The "Base Property Value" would only increase at the rate of the Consumer Price Index. When property is transferred, the new basis would be based on the "Fair Market Value" at the time of the transfer.

Finally, the Republican proposal includes prioritizing government spending. Everyday the Legislature is in session proposals for new programs or suggestions on how we can expand existing programs are introduced.

That's to be expected, but what is not to be expected is the continued addition of new programs or the expansion of existing program at the expense of commitments we have already made. Maine has plenty of obligations on the book right now with education, welfare, public safety, etc. and yet the expansions continue. Republicans propose a freeze on the expansion of existing programs and a moratorium on the creation of any new programs until we are meeting our existing obligations such as education funding.

Addressing out-of -control spending is the first and most important step in lowering Maine's tax burden. I am proud to support the Republican tax relief plan because it provides a sound vehicle with which Maine's taxes can be lowered. Lower the Maine tax burden is a substantial undertaking, but is achievable through a comprehensive plan. The Legislature needs to be disciplined and I believe the Republican proposal provides the necessary spending constraints while allowing for adequate government services.