Commentary

Tax Caps: the good and the bad

One disadvantage of a property tax cap is that while it offers significant tax relief to those with modest houses and restricted means it is an absolute bonanza for those who own multi-million dollar houses on the coast. Worse yet, many of those houses are owned by non-residents. Almost the only way to tax non-residents for services they receive in Maine is with a property tax because income taxes can only be collected by the state where the income is earned.

New Hampshire relies much more heavily on property taxes than Maine, having virtually no income tax. In part they do this deliberately because they have a significant number of wealthy non-residents who nevertheless consume government services for which it's both fair and prudent to charge them. I suspect Maine is now becoming much more like New Hampshire in that respect, certainly along the coast but even inland around many of the lakes. I don't have hard data but I see a lot of very expensive new homes going up and I wonder if they can all belong to full-time Mainers.

The other problem with tax caps, as California found out with Proposition 13, is that while you can limit the tax revenue available for state legislatures to spend, you can't prevent them from borrowing money unless you have a spending cap in place and require both a balanced budget and a larger fraction (2/3 at least) of the legislature to vote on any budget increases.

The California legislature, faced with the decreased revenues of Proposition 13, simply borrowed the state into bankruptcy. Contrary to what you will hear from many politicians, that does not make Proposition 13 wrong, but it does show that while capping taxes may a necessary condition for controlling government spending it is by no means a sufficient one.

In my view we do need to rein in government spending, which has been growing much faster at all levels (federal, state and local) than most people's incomes or inflation. Since the proposed property tax cap is the only place we have to start in Maine, and you have to start somewhere, at this point I believe I would grit my teeth and vote for it.

It may be that meaningful tax reform will only be possible after the passage of the property tax cap and the resulting consequences (good and bad) force Maine politicians and citizens to rethink the role of state and local government.

Alison Brown is a Gray resident

Note: The views expressed in Commentary do not necessarily reflect the views of the views of The Monument Newspaper or its staff.