Why TABOR Is Right for Maine

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The purpose of LD 976 "An Act To Provide Tax Relief" or TABOR is simple.

TABOR sets up reasonable parameters within which the Legislature can tax and spend; but to go beyond those reasonable limits requires voter approval.

It is the same concept as LD 1’s spending limit and property tax limits, but with teeth and added voter engagement.

By supermajority vote, the Maine Legislature has approved the concept of spending limits and controls on property taxes. First with LD 1 in 2005. Then with budget validation votes for local education spending in 2007. As a result of his budget validation procedure, local education spending is not affected by this new TABOR.

This new TABOR is the next logical extension of those tax and spending limits, learning from the experience from post-LD 1 taxing and spending and from concerns expressed with the 2006 version of TABOR.

Why TABOR? I can think of 220 million reasons.

The report we released earlier this year includes information from this Legislature’s Fiscal Office and shows that since the November 2006 vote, the Legislature has passed $220 million in tax increases over four years on Maine families and businesses. Last November, the taxes increases passed as part of the Dirigo Tax hike of April 15, 2008 were subject to a People’s Veto. By a two to one margin, voters rejected this tax increase. Clearly, Maine people like voting on state tax increases - and sometimes have different priorities than a majority of the Legislature.

TABOR would give the right to have the final approval of all net state tax increases (more than $300,000 annually, or 0.01 percent of the General Fund). TABOR would not limit the ability of the legislature to pass tax reform, providing it was revenue neutral within the 0.01 percent of General Fund threshold.

In addition, TABOR would require voter approval of state spending that exceeded inflation plus population growth, ensuring that large spending hikes do not force future tax increases without prior approval from voters.

At the local level, TABOR is needed because property taxes are still increasing faster than Maine people’s incomes.

In June 2004, voters passed the Maine Municipal Association-sponsored citizen’s initiative that mandated the State fund 55 percent of local education with the promise that, if the State did, property taxes would drop 15 percent. The Governor and Legislature followed through on their promise. From 2004 to 2008, state aid to local governments increased by $278 million, 25 percent.

Yet, during these same four years, total local spending soared $659 million, 22 percent, and property taxes climbed $343 million, 21 percent. Despite the increased money from Augusta, property taxes and local spending climbed much faster than inflation (16 percent, including population growth) and still faster than people’s ability to pay (personal income, up 19 percent).

If local governments had just increased spending equal with inflation plus population growth coupled with the increased state aid, local taxes would have been $187 million less in 2008 and property taxes would have decreased in real dollars.

TABOR adjusts the LD 1 local limit to include an upper limit – nominal personal income growth.

If property tax collections increase faster than that limit, it will require voter approval at the next regular or special election.

In addition, TABOR increases the voter’s right to know by requiring that towns post their budget online at least two weeks prior to a vote; that towns and counties use the model chart of accounts to uniformly report spending; and that adopted budgets are posted online.

Lastly, TABOR requires that the automatic gas tax increase built into current Maine law be subject to annual approval by the voters as well. Mainers’ incomes are not on autopilot. Neither should their taxes.

The goal of TABOR is simple – give the voters the final say when it comes to tax increases and unsustainable spending increases.

Tarren Bragdon is CEO of the Maine Heritage Policy Center, a nonprofit think tank. A version of this testimony was given before the Maine Legislature's Joint Standing Committee on Taxation in Augusta, Maine on April 16, 2009.