The tax cap that’s headed for a referendum ballot later this year would push homeowners’ valuations back to 1996 and cap property taxes at one percent of those values. Because Maine relies so heavily on property taxes, a cap would necessitate one of two things: drastic cuts in services at the state and local level, or a dramatic tax shift from property to sales, excise or income taxes in order to keep the revenue flowing.
Before deciding what makes the most sense, it’s useful to consider how we got here. Maine’s constitution requires that all property be assessed at its “highest and best use,” meaning that town assessors are obliged to keep track of sales and adjust everyone’s values to reflect rising (or, presumably, falling) prices for real estate. In Maine, where the market price of shorefront property of all types has risen through the roof in recent years, that means ballooning valuations in communities with a significant amount of waterfront. Some communities have experienced what amounts to a windfall: highly valued shorefront property, largely owned by summer residents who don’t use the schools and can’t vote, that must – under the state constitution – be taxed according to its “highest and best use.” In some communities the summer residents who own the best waterfront property are paying the lion’s share of the town’s taxes.
Would a tax cap help? Obviously it would ease the waterfront homeowners’ pain. But unless we really believe in draconian cuts in services – fewer teachers, bigger classes, reduced or eliminated municipal services, more pressure for assistance from an already-strapped state government – it begins to look like swatting mosquitoes with a sledgehammer. California invented tax caps a dozen years ago, and now it’s broke. Tax reform has got to be more creative than this.