In the coming weeks, the Legislature has the difficult task of passing a balanced budget that addresses the needs of our state but falls within the fiscal constraints provided under state tax code.

Gov. Paul LePage’s proposed tax reform and spending priorities have generated some constructive debate in recent weeks. Municipal officials have weighed in on the pieces that would affect municipal finances and property taxes, particularly the elimination of state-municipal revenue sharing.

But an important policy consideration has been absent from the debate, one that transcends state spending priorities beyond revenue sharing: the disparate fiscal capacity of municipalities and their ability to withstand the effects of lost revenue.

The governor deserves praise for submitting such a bold proposal. Regardless of what one thinks about the reforms he has contemplated, it provides a necessary and forceful push from the state’s highest office that is likely needed for Maine to actually reform its outdated tax code. For years, legislators have argued that the tax system is out of balance and should be modernized.

When we consider all state and local taxes collected, about 45 percent come from property taxes, 34 percent from income taxes and 21 percent from sales and use taxes. Many folks agree state income tax rates should be lower, but many also believe that of greater concern is Maine’s over-reliance on property tax, which is regressive and not based on one’s ability to pay.

It is important for Mainers to remember is that no two towns are the same. For years, state policy has recognized the significant disparity in fiscal capacity amongst municipalities. Some towns have coastal or lakefront property that adds to their tax base, and others are fortunate to host industry. The fact is that whether a town has a large or small tax base is largely outside its control.

One might argue that lower taxes would cause a flood of new investment, but plenty of towns in Maine have very low taxes but still have not seen any economic booms. In fact, most towns are now giving away tax breaks in exchange for a few jobs created.

So doesn’t this mean relatively poorer towns are at a disadvantage to provide essential services? Yes, and this should be a serious concern for state policymakers. Just as the federal government’s most important role is the defense of our nation, the state’s most important role is to protect its residents, educate its youth and provide the infrastructure on which our economy depends: public safety, public education and public works.

The state delegates many of these tasks to local government, but retains an inherent responsibility to ensure these functions are administered effectively. The state has responsibility to ensure that every child, regardless of their circumstance, is provided a quality education. The state has responsibility to ensure that every resident, regardless of their ZIP code, is protected during emergencies or if under threat of crime.

Therefore, over the course of many years, state government developed policies with intent to equitably distribute the means to pay for those core government functions. That is why Fairfield, with state valuation of $368 million, would be allocated a little more than $1 million in revenue sharing funds for fiscal 2016. And it is why Harpswell, with valuation of $1.8 billion, would be allocated only $155,112.

The discrepancies in valuation also is why the state’s education funding formula provides more subsidy to poorer districts, and less to wealthier ones. Eliminating, shrinking or even stagnating programs whose purpose is to produce greater equity will cause an ever-growing gap in the level and quality of public safety and education between towns and school districts statewide.

Instead of eliminating revenue sharing, I encourage state policymakers to consider reforming the program to focus those dollars on communities that need them most. It may be a minor source of revenue for some towns, but for Fairfield it equates to nearly 3 mils on the tax rate when fully funded. Although the proposed reforms, when viewed in their entirety, may result in a modest net tax decrease for many Fairfield residents, we can be sure that will not translate into greater willingness to pay significantly higher property taxes.

Therefore, what is likely to result over time is an erosion of essential services in poorer towns, while life goes on as normal in wealthier towns that never relied much on state money anyway. I believe our elected leaders have the best intentions, and I hope when all is said and done we have a tax system that is fair to all concerned.

Joshua Reny is town manager of Fairfield.


Only subscribers are eligible to post comments. Please subscribe or to participate in the conversation. Here’s why.

Use the form below to reset your password. When you've submitted your account email, we will send an email with a reset code.

filed under: