Maine lawmakers get a tax-cutting message from the voters

PORTLAND, Maine - After a couple of failed attempts, tax foes finally mustered a victory in a statewide referendum to rein in taxes in Maine.

With the beverage tax abolished Tuesday, voters will probably next face two more tax-related referendums on Election Day a year from now. For lawmakers, it is an ominous sign as they face a budget shortfall of at least $500 million for the coming two-year cycle.

Senator Peter Mills, a Cornville Republican, said the tax repeal, along with the narrow victory for water bonds, serve as a scene-setter for the upcoming session.

"It sends a signal at this point that no form of [new] revenue is appropriate, and maybe that's the way to start this session right," he said. "It'll give the Democratic majority great pause in terms of raising taxes to get out of this box."

Senator Joe Perry, Taxation Committee cochairman, said there is a sense of foreboding following previous budget shortfalls that date to Governor John Baldacci's first term in office, when lawmakers had to close a gap of $1.2 billion.

Since then, there have been smaller shortfalls, including $190 million last year.

"I don't know how we get out of this without looking at revenues or hitting the rainy day fund or cutting spending or all three," the Bangor Democrat said.

For all the uproar over Maine's tax burden, Mainers previously failed to enact a referendum to cap property taxes in 2004 and two years later rejected a so-called Taxpayer Bill of Rights aimed at limiting government growth by tying spending to the inflation rate.

Ted O'Meara, spokesman for the Fed Up With Taxes coalition, said those past referendums raised public expectations that something was going to be done, but there were no tax breaks or major tax reform.

Voters apparently decided enough was enough when lawmakers seeking funding for Baldacci's Dirigo Health initiative enacted a new tax on beer, wine, and soda, as well as on an assortment of other beverages, including flavored water, iced tea, and lemonade.

Mainers rejected the tax by a nearly 2-to-1 ratio on Election Day.

Without the new funding source, Dirigo will revert to a controversial savings offset payment assessed on insurers that has sparked regulatory battles and court fights.

O'Meara said Mainers had a number of problems with the beverage tax. For starters, many were angered by the way the tax was adopted "in the middle of the night" near the end of the session, he said. More important, people are simply fed up with taxes, he said.

"You can't separate this vote from the times we're in," O'Meara said. "People are struggling to make ends meet. Prices of all sorts of things have gone up. You see it when you go to the grocery store, pay your heating oil bill or put gas in your car."

Perry said the beverage tax was repealed because "we're not having an honest, realistic discussion about the taxing and spending needs."

"I've got a conservative friend," he said. "He'll call me all the time. He has two complaints. If we have a surplus, that's all the proof he needs that we're taxing too much. If we have a structural gap, that's all the proof he needs that we're spending too much."