Thursday, April 17, 2014
Any discussion of taxes inevitably bumps into the pesky problem of fairness. And definitions of fairness depend on definitions of boundaries. Your right to freedom ends where my nose begins. The only definition of fairness to which most Mainers seem to agree is tax exporting, a euphemism for “Sock it to the tourists; who cares about them!” Taxes are fine, as long as someone else pays them.
Maine’s system of taxation is full of definitions of fairness, some explicit, many much less so. Our largest state expenditure – elementary and secondary education – is based on the idea that every child in the state ought to have an equal opportunity for education. Since education is financed largely by local property taxes, state money is allocated to localities based on equalizing property value per student. No child should have a better opportunity for education simply because she or he lives in a town with lots of taxable property.
A similar, though far smaller, nod to fairness exists in the municipal revenue-sharing program through which the state allocates 5 percent of sales and income tax revenue to municipalities based roughly on population weighted by per person tax base. Property-rich towns get somewhat less per person than property-poor towns. The very existence of this program was put in question when the governor proposed cutting it altogether in his last budget proposal. And efforts to revive, strengthen and perhaps reform the program have again brought the questions of fairness and boundaries to the fore.
Consider the following facts. Maine, in 2010, had 11 municipalities with more than 10,000 jobs – not employed residents but jobs located within their boundaries. Those holding the jobs could live anywhere, and most in fact commuted from outside these larger (for Maine) urban centers. These 11 job center towns accounted for 44 percent of all jobs and 44 percent of all consumer retail sales in the state. But they accounted for only 22 percent of the state’s population.
OK, so people live in one town and work in another. What’s the big deal?
The big deal, at least for taxpayers within these 11 cities, is fairness. “We,” they say, “account for 22 percent of all the people in the state, but we pay 25 percent of all the property taxes paid in the state. And we make this commitment with only 19 percent of all the taxable property in the state. Our average property tax burden is over $1,800 per person compared with less than $1,600 for the rest of the state. And, to make it still worse, our median household income is 5 percent below the state average. That’s just not fair!”
“So stop spending so much,” people in other towns say.
“But then infrastructure deteriorates, and job growth slows or declines and we all suffer,” respond the job center leaders. And so it goes. We struggle to find the place where “my” problem versus “your” problem becomes “our” problem.
The question of fairness in this case must find some relevant principle of equity, something equivalent to equality of opportunity for all our children in the sphere of education, something that will allow us to stretch our definition of who is “us” and who is “them” beyond our municipal boundaries. And that principal lies somewhere in the idea that we all share in a growing, dynamic economy (or suffer in a stagnant, shrinking economy). Our municipal boundaries were formed in the days of small-scale agriculture and a day’s horse ride between town centers.
Today, businesses locate in a single municipality but depend on a regional labor force, transportation and communications links to the world. Economically viable cities serve all of us in the state.
We need to expand our definition of fairness to include the obligation to support the urban infrastructure needed to maintain and expand the employment base upon which we all depend.
Charles Lawton is chief economist for Planning Decisions Inc. He can be reached at: