At least one Maine politician seems to have received the message from Maine’s weary homeowners that something needs to be done about the state’s growing reliance on property taxes to cover the costs of local government and schools.

Eliot Cutler, the independent who came up short in his bid for the Maine governorship in 2010, is running again and last week proposed a set of recommendations to overhaul how Maine distributes state and local tax burden.

Among other ideas, Cutler recommends increasing the homestead exemption from $10,000 to $50,000 for all homeowners in Maine who have owned their home for at least 12 months. To make up for the lost revenue such a move would cause, Cutler would increase the state sales tax from 5.5 percent to 7 percent from May 1-Oct. 1, kicking it back to the towns. That increase would impact year-round residents, but it would also tap into those summer tourist dollars, Cutler says. The sales tax rate would revert to 5.5 percent during the colder months.

Cutler’s plan, which he says would drop property taxes 20-40 percent, is considered a progressive form of taxation, in that the poorer you are the more tax relief you receive. With a $50,000 homestead exemption, someone with a $150,000 home would be taxed on $100,000. Someone with a million-dollar home would be taxed on $950,000. In other words, the plan helps those who really need it, which sounds like welcome relief after years of Maine’s growing reliance on property taxes as the prime source of funding for town government and schools.

While the plan sounds promising, Cutler’s willingness to actually put forth any kind of plan is encouraging. Instead of promising some sort of ephemeral “hope and change,” as some politicians do without explaining what they really mean, he’s spelling out exactly what voters would get if they elect him.

Cutler’s attempt to address the unfair burden homeowners are enduring here in Maine is also the right thing to do. (And it isn’t just homeowners who would benefit. It’s all those who rent, too, since property tax increases are passed on in the form of higher rents.) While the Legislature has promised to fund education at 55 percent – the now-infamous target set by L.D. 1 in 2005 – it comes nowhere near meeting its own law. Local taxpayers, therefore, have to make up the difference. In the last three years, municipalities have lost more and more state funding as Gov. Paul LePage has raided the revenue-sharing arrangement in which Augusta is supposed to kick back 5 percent of corporate, income and sales tax revenue to municipalities. While LePage, who is running for re-election, proposed to totally suspend revenue sharing, the Legislature clawed back some this budget cycle, about $40 million worth. Still, the state is nowhere near funding the required 5 percent.

Cutler’s plan has its detractors. His Democrat opponent, Mike Michaud, says the plan “picks winners and losers, and he risks leaving municipalities on the hook for the bill.” (Michaud is right to point out the obvious hitch with Cutler’s plan since it does rely on sales tax to make up for the loss of property tax.) LePage says Cutler’s plan “robs Peter to pay Paul.” He is also correct, since sales taxpayers would get hit. But such would be the case for any tax scheme. Peter gets robbed quite a bit since fair and equitable distribution of the tax burden is no easy feat.

With that said, LePage and Michaud should take this chance to one-up Cutler. Real tax relief doesn’t just shift the burden, as Cutler’s plan does, it reduces it. LePage, despite his conservative leanings, has done little to reduce the tax burden, especially for the property taxpayer. In fact, he’s done quite a bit to increase that burden. And if Michaud’s record in Congress is any indication, he doesn’t even know what a tax cut is.

While Cutler’s plan needs further vetting, we appreciate his apparent grasp on the disturbing trend of punishing those who have seemingly made the mistake of buying a house in Maine. He had good timing, too, releasing his plan in mid-April. Many voters in southern Maine had just paid their April property tax bills and are learning how town councils and school boards are formulating their budgets for next year, many with significant tax hikes. While there will be plenty of time to probe Cutler’s plan, it’s time for state lawmakers to follow Cutler’s lead and do something to ease their burden, either by cutting or shifting. Property owners and renters, we’re sure, would appreciate either strategy.

–John Balentine, managing editor

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