AUGUSTA, Maine — Independent candidate for governor Eliot Cutler continued his roll-out of policy ideas Tuesday with a new proposal to lower property taxes while also increasing state aid to local communities, funding for education and the budget for marketing the state of Maine.
Cutler also has outlined options to pay for the $185 million plan with increases in the sales, meals and lodging taxes, as well as expanding the sales tax to recreation and entertainment activities. He says the plan would result in an overall tax cut for Maine residents because it puts more of the state’s tax burden on visitors and seeks to reduce property taxes. He acknowledged that convincing voters to understand and support the details of his plan on the heels of previous failed attempts at tax reform will be a challenge.
“Anybody could have these ideas and maybe other people have,” said Cutler to the Bangor Daily News on Tuesday morning. “What distinguishes me in this case is that I’m willing to take a leadership role in reforming our tax structure. John Baldacci never did it. Paul LePage really hasn’t done it. All he’s done is push more of the burden onto cities and towns. If you’re going to be a leader, you have to be responsible and you have to be transparent. You have to show voters that you’re willing to take a risk.”
Cutler, who is locked in a three-way race with Republican incumbent Gov. Paul LePage and Democratic 2nd District Rep. Mike Michaud, drew criticism from the other campaigns when he released the details of his plan Tuesday morning. It calls for a $100 million increase in funding for state towns and cities, a $75 million increase in state education funding and a $10 million increase in funds for branding and marketing Maine.
The plan also includes an increase in the homestead exemption tax rebate program from $10,000 to $50,000 up to 50 percent of the assessed value of a home. Cutler claims that if enacted, it could cut property taxes for Maine residents by between 20 and 40 percent. To counteract the effect on local budgets, Cutler proposes a Revenue Rebates program to reimburse municipalities for the homestead exemption program to the tune of $100 million statewide; a Small Business and Farm Fairness Adjustment, which would reimburse a portion of those entities’ property taxes if they pay more than 6 percent of their net income; a $75 million Education Challenge Fund to increase state funding for education; and a Marketing Maine Trust Fund of $10 million annually.
Cutler estimates that it will cost $185 million to fully fund his proposals. One option he proposes is to cover that with the following tax increases:
— A seasonal sales tax rate of 7 percent from May 1 through October 30, excluding auto sales and building materials, and a rate of 5 percent during the rest of the year, for estimated new revenues of $90 million.
— A permanent 8 percent sales tax on meals and lodging, with one-third of revenues to support the Marketing Maine Trust Fund, for additional revenues of $30 million.
— An extension of the sales tax base to include amusement and recreational services such as golf, skiing, bowling, theater tickets and amusement parks, for additional revenues of $20 million annually.
— Better collections of sales taxes for online purchases, for additional revenues of $20 million.
— An increase of the real estate transfer tax from 0.44 percent to 1 percent, which would be offset by a 50 percent tax credit on the first $200,000 of the sales price of homes used as primary residences. That would generate an additional $20 million a year.
As an alternative to those elements, Cutler proposes a permanent increase on the sales tax rate from 5 percent to 6 percent, including better taxation of online sales, which he estimates would be worth about $180 million annually.
Sen. Richard Woodbury, I-Yarmouth, who is an economist by trade, prepared an impact analysis of Cutler’s plan that shows property tax cuts would vary from 5 percent on a $500,000 home in a community with a high property tax rate to 35 percent for a $50,000 home in a community with a low property tax rate.
Brent Littlefield, strategic adviser and political consultant for the LePage campaign, attacked Cutler’s plan because of its taxing and spending nature. He said one flaw in the plan is that the governor has little influence over how municipalities would choose to use the extra funding.
“Liberal Eliot Cutler would like to dictate from on high but he has no control over local governments,” said Littlefield in a prepared statement. “Local governments are under no obligation to cut any property taxes. He can’t control them. Many will just do what they have done for years and increase spending, not cut taxes.”
Littlefield said LePage’s stated plan to eliminate the state income tax if he is elected to a second term, as well as tax cuts he and Republicans pushed through in 2011, are better for Maine.
Lizzy Reinholt, a spokeswoman for Michaud, said Cutler’s plan is risky.
“Just like Gov. LePage and his fiscally irresponsible tax breaks for millionaires, Eliot Cutler’s plan picks winners and losers and his risks leaving municipalities on the hook for the bill,” said Reinholt in a prepared statement. “The best way to reduce property taxes is for the state to meet its existing obligations to towns and cities by funding municipal revenue sharing and the state’s share of K-12 education.”
Reinholt said Michaud’s major qualification for being governor is his willingness to work toward bipartisan compromise.
“After four years of obstructionism from Paul LePage, Maine needs a leader who can work across the aisle to get things done,” said Reinholt.
Cutler will have to sell his plan aggressively if history is any indication. In 2009, the Legislature enacted a tax reform package that included lower income taxes and higher and expanded sales taxes, as well as the meals and lodging tax. That proposal was repealed by citizen initiative in June 2010 with approximately 60 percent of voters deciding against it.
Woodbury was also one of the leaders of a “Gang of 11” tax reform package last year that failed to gain enough support for enactment.
“Obviously there’s a political risk to say something definite about anything, particularly something about taxes,” Cutler said. “I’ve said I’ll debate anybody at any time on the merits of this proposal.”