TAX CAP SUMMARY
THE BILL LIMITS annual expenditures from the state's general fund, highway fund and other special revenue funds to increases in population and inflation.
IF REVENUE EXCEEDS the spending cap, 20 percent of the excess goes to a budget stabilization fund and 80 percent to a tax relief fund.
THE BUDGET STABILIZATION FUND may be used only in years when revenue falls short of the cap level.
THE TAX RELIEF FUND must be used for broad-based tax rate reductions or refunds proportional to individual income tax personal exemptions claimed in the previous tax year.
ANY EXCESS REVENUE in the highway fund must be used to provide a decrease in motor fuel taxes. State agencies that manage other special revenue funds must report surpluses to the Legislature with a plan for refunding the revenue.
A STATE TAX INCREASE would require a majority vote of each house of the Legislature and majority approval of the voters.
EXCEEDING CAP LIMITS would require a majority vote of each house of the Legislature and majority approval by the voters.
VOTER REFERENDUMS would also be required for increases in the property tax levy, the county tax assessment and the annual indexing of motor fuel taxes.
EXCISE TAX CUT SUMMARY
THE BILL WOULD CUT the excise tax on new cars and trucks by 50 percent and make similar cuts during the second, third and fourth years of vehicle registration.
FOR NEW HYBRID-FUEL VEHICLES and cars that get more than 40 mpg, the bill would eliminate the 5 percent state sales tax and the first three years of excise tax.
TWO OTHER BILLS ON THE NOVEMBER BALLOT
ONE ASKS VOTERS to repeal the state's 2007 school consolidation law.
THE OTHER WOULD REVISE the medical marijuana law to create nonprofit drug dispensaries and a statewide ID card system to protect patients from arrest.
Mainers who thirst for action on taxes will find a deep watering hole at the voting booth next fall.
The Nov. 3 ballot will include referendum questions on excise taxes and a proposed state spending cap that, in the eyes of supporters, would offer relief from a heavy tax burden.
Both questions set the stage for major public and legislative debates on tax reform at a time when voters are struggling to cope with the impact of a deep recession.
It will be the second time that voters grapple with a spending cap since 2006, when the so-called Taxpayer Bill of Rights, or TABOR, was defeated at referendum, 54 percent to 46 percent.
Legislators are facing tax reform for the second time since 2007, when the Maine Senate failed to pass a Democratic proposal to broaden the sales tax and reduce the income tax rate.
It remains to be seen whether the Democratic plan will fare better this year. Even less certain is whether the plan will mollify tax activists who are frustrated by the Legislature's performance.
"How can we say that it's been anything but dismal?" asked David Crocker, a leader in the drive that put the spending cap on the November ballot.
WANTED: GUARANTEED TAX RELIEF
Both questions were the subject of statewide initiatives that require the Legislature to approve them as written or pass them on to voters. Legislative enactment is a rare occurence.
The proposed cap is a modified version of the Taxpayer Bill of Rights. It would limit state spending growth based on population and inflation and channel excess revenue into special funds to be used for future budgets or to reduce or refund taxes.
Any spending in excess of the cap would require a simple majority vote of both houses of the Legislature. That's a departure from the 2006 proposal, which required a two-thirds majority.
Spending above the cap would also be subject to voter approval in a statewide referendum.
If voters approve the excise tax question, the tax on new cars and trucks would be cut in half the first year, with similar cuts made in the second, third and fourth years.
For new hybrid-fuel cars or those that get more than 40 miles per gallon, the measure would eliminate the sales tax and the first three years of excise tax.
Maine Leads, a group that is backing both the excise tax and the spending cap referendums, estimates that voters would save more than $70 million a year through the excise tax cut.
Crocker, the Portland lawyer who formed the group TABOR Now to support the spending cap, says that measure is needed because the Legislature has failed to restrain state spending. He said lawmakers have raised some taxes and fees by about $220 million since the 2006 referendum.
"They just keep breaking promises, honestly," he said. "Politicians have made a lot of promises for tax relief, and TABOR is a guarantee."
The 2006 spending cap came just two years after an unsuccessful referendum campaign by tax activist Carol Palesky to cap property taxes at 1 percent of assessed value.
The spending cap inspired another fierce debate that saw supporters and opponents spend about $2.5 million. In the State House, the proposal galvanized lawmakers, who struggled to craft a tax reform bill that would address public concerns about taxes.
Democrats finally endorsed a proposal that would have expanded the 5 percent sales tax to products and services that have been tax-exempt, such as amusements and car repairs. The added sales tax revenue would have allowed for a cut in income taxes and local property taxes.
But the bill did not pass, and in 2007, lawmakers and Baldacci steered clear of tax reform to concentrate on closing a $95 million budget shortfall.
House Majority Leader John Piotti, D-Unity, former chairman of the Legislature's Taxation Committee, said he is frustrated by the Legislature's failure to enact tax reform.
"But I also recognize, having worked in the trenches, that tax reform is the hardest nut to crack," he said. "I take a lot of solace in the fact that two years ago, we came a lot further than we ever have."
Piotti said Democrats plan to introduce a new bill in about a week but are being careful not to write a proposal that would have to appear on the ballot with the spending cap as a competing measure.
"We want to show that the Legislature can take action on tax reform," he said, "and we want to give people a chance for a clean up-and-down vote."
Baldacci did not support the 2007 plan because it did not reduce spending, lacked Republican support and raised concerns in the business community.
NEED TO REIN IN SPENDING SEEN
Baldacci opposes the spending cap and excise tax referendums, a spokeswoman, Joy Leach, said last week. In a written statement, Baldacci said he had met with leaders of both parties, and that all agreed on the need to address income taxes during the legislative session.
"Right now, the top rate is too high, and it kicks in at income levels that apply to too many lower- and middle-income working families," the Democratic governor said.
House Minority Leader Joshua Tardy, R-Newport, said he hasn't studied the new spending cap question closely, but he supported the idea of indexing spending to inflation and population.
He said he was unsure about the excise tax proposal, because of questions about whether towns would have to raise property taxes to replace the lost revenue. The excise tax generates about 10 percent of municipal revenue, according to the Maine Municipal Association, and is often used for roadwork.
Tardy said Republicans want to reduce the income tax, but the plan described by Piotti resembles the 2007 legislative measure too closely and ignores the need to rein in spending.
"It's the spending problem that creates the tax burden, not our patterns of collecting revenues," he said.
The business community is likely to play a key role in shaping the outcome of the referendum voting. In 2006, the Maine State Chamber of Commerce did not endorse the spending cap, offering instead an alternative plan.
The chamber's board of directors hasn't taken a position yet on the new spending cap, but chamber President Dana F. Connors said he would likely urge the organization to support it.
"I would find it difficult to recommend against it," Connors said.
He noted that the chamber played a key role in supporting LD 1, a law passed in 2005 that set state spending caps while increasing education subsidies and property tax refunds.
But Connors said he is concerned that state law does not now require a legislative vote or public referendum to override spending cap limits.
"The need for an override will be there when revenues are up and the temptation is to spend," he said.
The Maine Education Association, the union representing public school teachers, also opposed the 2006 spending cap and joined with the chamber in proposing an alternative approach.
Mark Gray, the union's executive director, said Maine still needs to overhaul its tax structure, and by failing to act, the Legislature has laid the groundwork for tax relief petition drives.
"At some point, this is going to blow up, or we're going to have to roll up our sleeves and do something about it," he said.
Tardy, the House minority leader, agrees.
"The fact that we're faced with this proliferation of initiatives is just symptomatic of the fact that we've got an unhappy and disenchanted population," he said.
Political Correspondent Dieter Bradbury can be contacted at 791-6329 or at:
dbradbury@pressherald.com
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