With time dwindling until Election Day, voters will have to decide whether they believe the Taxpayer Bill of Rights will gradually rein in state spending and reduce taxes or force immediate cuts and create a system where government is run by referendum.

Maine’s high state and local tax burden – ranked as No. 1 in the nation, with 13 percent of income going to taxes – is fueling interest in the proposal.

On Question 1 on the Nov. 7 ballot, the language voters will see never mentions the Taxpayer Bill of Rights or its acronym, TABOR. Instead, the question asks:

“Do you want to limit the increases in state and local government spending to the rate of inflation plus population growth and to require voter approval for all tax and fee increases?”

Both sides agree the wording is not accurate.

The proposed legislation that Question 1 is based upon says the spending limit at the state level would be inflation plus population growth, but at the municipal level it is inflation plus population or change in assessed value, whichever is lower.

The two sides disagree whether those spending limits could force a cut in current expenditures if population, or assessed values go negative.

“Look at the question,” argued Tarren Bragdon of the Maine Heritage Policy Center, which drafted the proposal. The key word is “increases,” and if spending limits don’t allow spending growth, the worst-case scenario is a flat-funded budget, he said.

Not so, says Geoff Herman of the Maine Municipal Association, whose organization has run data showing that if TABOR had been in place for fiscal year 2006, it would have meant budget cuts for 172 municipalities.

Legislators will sort out the details if the referendum passes. While the measure would become law 45 days after the vote, the Legislature can amend it. And the limits on state spending are not binding under the constitution, which says statute can’t limit the Legislature’s power of taxation.

What TABOR says

The proposed legislation that is the basis for Question 1 calls for several things to happen.

Increases in spending would be limited to the rate of inflation plus population growth at the state level; inflation plus population or the change in assessed value, whichever is lower, at the county and local level; and, inflation plus school enrollment in school administrative units.

Any spending over that limit would have to be approved by two-thirds of the legislative body in charge – be it a town or city council, Town Meeting or state Legislature. It would then have to go on the ballot and be approved by a majority of voters in the affected district.

Even if government stays within its spending limits, any tax or fee increase would have to also be approved by two-thirds of the legislative body in charge and a vote of the people.

The proposal also says that 80 percent of revenue collected in excess of approved spending would be sent back to taxpayers as refunds, and 20 percent would go into a budget stabilization account to allow for level funding of programs and prevent tax increases in times of recession.

It is unclear how fast that pot would grow or how far it would stretch in a prolonged economic downturn. The so-called ratcheting-down effect on budgets is a major concern to TABOR opponents, who say program budgets reduced in lean times wouldn’t be able to recover when the economy rebounds under the spending limits.

TABOR pros and cons

Bragdon argues the only thing TABOR would do is slow the rate of government growth. The Maine Heritage Policy Center says growth under TABOR would be at 3.7 percent at the state level; 3 percent at the local level; and, 2.8 percent for schools – based on current economic conditions.

At that rate, Maine’s tax burden would drop to the national average by 2021.

“The best way to get Maine’s tax burden down is to have reasonable growth,” Bragdon said. “You can’t have government spending growing faster than your income. It’s kind of sad to me that all we want to be is average,” he said, but if Maine’s taxes dropped to the national average, he estimated it would mean $1,600 less in taxes per household.

Herman said in addition to his concerns that TABOR would actually force a cut in municipal budgets, there are other consequences that would disrupt government.

“In the last month to six weeks, I think there is finally an understanding that this bill is seriously flawed,” he said.

Those flaws include requiring a ballot vote for every expenditure over the spending limit, which Herman says would create “government by referendum.” Not only would that be expensive, but also it would put special-interest groups in charge instead of elected leaders.

Requiring every tax and fee increase to be approved, even when the budget comes in under the spending cap, is excessive, he said.

“To increase the non-resident fishing license fee would require a two-thirds vote of the Legislature and a statewide referendum,” he said.

He also believes the formulas, particularly at the local government level, make no sense. “It’s a crazy formula,” he said, because it causes erratic annual swings and some of the data, like municipal population changes, doesn’t exist from any reliable source.

Herman also says the two-thirds voting requirement puts power in the hands of the minority.

“Town Meeting has always gone on the one-person, one-vote principle,” he said, but under TABOR, one-third of the voters plus one vote would rule.

Bragdon countered that two-thirds votes are already required of the Legislature on important issues, like state bonding and imposing state mandates on cities and towns, and taxes in Maine have reached that level of seriousness.

“Geoff is completely about defending the status quo,” Bragdon said.