Local government has failed at tax reform

By Gov. Paul LePage

    In January 2005, a law was passed that was supposed to cut property taxes and reduce government spending. A decade later, it has failed to decrease the overall tax burden on Maine residents. The law was called LD 1, and it set a limit on the growth of state and local government.

    The state is doing its part. Spending in 2015 is 13 percent below the limit. That’s almost half-a-billion dollars under. ($471 million)
    But in 2014, nearly one-third of municipalities (31 percent) exceeded the limits of the law. In recent years, one-quarter to one-third of municipalities have exceeded the limit.
    Despite its good intentions, LD 1 has not made local government more efficient and less costly. It has not spurred significant efforts at collaboration between communities to reduce the local tax burden.
    We cannot count on local officials to reduce taxes. That’s why our budget sends relief directly to the property taxpayer.
    In fiscal year 2015, we provide $34 million for the new Property Tax Fairness Credit. This sends property tax relief directly to Mainers.
    We are proposing a $60 million increase in the second year of our budget. We will then maintain funding for this tax relief at $90 million a year.
    We also double the Homestead Exemption from $10,000 to $20,000 to help Mainers 65 and older stay in their homes.
    When LD 1 was passed in 2005, 37 percent of the state’s general fund budget went to local government. In 2014, 37 percent of the general fund is still going to local government.
    We must focus on tax relief for Mainers, not welfare for local government. By cutting the income tax, my plan gives money directly back to Mainers. Local officials don’t talk about this side of the equation.
    For example, Waterville gets $1 million in revenue sharing. But Waterville residents pay almost $10 million in income tax. I’d take a 10-to-1 deal any day—and I’m sure Waterville residents would too.
    In a smaller town, Greenville gets $67,000 in revenue sharing. Its residents pay $1.5 million in income taxes. I bet they’d like to keep the 1.5 million.
    The point is this: any loss in revenue sharing pales in comparison to the hundreds of millions of dollars Mainers would keep under my plan.
    It would return $300 million to Mainers. That’s a massive pay raise for hard-working families.
    It’s time for local officials to stop blaming the state for their budget woes. They must get creative, learn to work together and find efficiencies in delivering services regionally.
    Local officials are concerned with local budgets in cities and towns. We are concerned for the Mainers who live in those cities and towns.
    Let’s work together to give them the relief they deserve.