Sat, Jul 12, 2014 ●
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Probing Politics: Excess, excise and TABOR II


Probing Politics: Excess, excise and TABOR II

"Government should grow at the same rate as the economy," according to Christopher "Kit" St. John, executive director of the Maine Center for Economic Policy, speaking in opposition to TABOR II at Policy Soundings, a forum for state and national issues.

It seems to reflect a deeply held belief that government is entitled, in equal proportion, to the fruits of our labor. The more we make, the more our government deserves.

If government grew at the rate of inflation and population, it might be more reasonable – but pegging growth in government to the growth of the economy assumes we want government to grow rather than demanding that it be more efficient and less costly.

People who are creatures of government argue that the government is us and, therefore, what is yours is theirs. That's understandable coming from the donors who oppose TABOR II. They rely on government for their livelihoods: The Maine Municipal Association, Maine's state employee union, the teacher's union, companies with state contracts, etc. They are simply protecting their self-interest.

As the vote on TABOR II approaches, members of the Appropriations Committee have been doing a good job closing the gap between tax revenue and state spending. They have shed more than $500 million in expenses – but more work needs to be done. They now have to find another $200 million to cut, or they'll need to raise taxes.

That's why the outcome of TABOR II is so important to both sides of this debate and why we all need to do our homework.

Five years ago, voters approved a law called LD 1 that made three promises to control spending and lower taxes:

First, state government would pay for 55 percent of the cost of local kindergarten-to-grade 12 education. That hasn't happened.

Second, municipalities and school districts were expected to reduce property taxes from those savings once they didn't have to pick up the entire tab for education. That, too, hasn't happened.

Third, the Legislature and governor would not increase state spending from the General Fund beyond a specified formula. This is the one promise that was kept.

State and local governments share the blame, but the real failure of LD 1 was that it had no teeth to ensure property tax relief. Also, the limit is only for the state's general fund. Other categories of spending have no cap. Voters trusted their elected officials to do the right thing and it didn't happen.

Here are some data points. From 2000 to 2006, state government spending increased by 34 percent. Personal income for state employees grew by 31percent, but personal income in the private sector grew by only 22 percent. The average income in the private sector in 2006 was $35,614. The average income in state government was $42,411.

TABOR II is about control. It says that elected officials have to ask permission from the voters if they want to increase spending or taxes beyond prescribed limits. If the voters reject the request, then elected officials are forced to make choices and set priorities within the limits.

Here's an example of how it would work: When voters were asked last fall if they supported the new beverage tax to fund the Dirigo Health Plan, they said no. However, a majority of the Legislature then went ahead and added a 2.14 percent tax onto our health-care services to fund the failing plan. They didn't have to ask permission, they just added the tax. They would have had to ask permission under TABOR II.

Also on the ballot is a proposal to reduce the state's vehicle excise tax.

While towns brace for cuts in state revenue-sharing and more unfunded mandates, the proposed excise tax reduction will simply compound the pressure on local governments. Unlike the state with its many revenue sources, towns primarily have the property tax and the excise tax for revenue. Data shows that 99 percent of excise taxes go directly to town road maintenance budgets. If the excise tax is reduced, then towns will either cut other municipal services or raise the property tax – or do some of both.

In Maine, 68 percent of vehicles are more than 5 years old and, therefore, those owners will not realize any savings if the excise tax is reduced. The savings are realized only for new and late-model vehicles, while hybrid vehicles are charged nothing for the first three years.

The fate of TABOR II and the excise tax are now in your hands. Think about the role and cost of government and then make an informed decision on or before Nov. 3. Also, ask your state legislators how they come down on these two issues. It may surprise you and will definitely inform you.