Dmitry Bam is a professor of law at the University of Maine School of Law. Views are the writer’s own.
Maine’s housing crisis is real. Gubernatorial candidate Shenna Bellows has proposed addressing it by freezing property taxes for Maine residents and increasing the rate for out-of-state owners of second homes and investment properties.
While Bellows’ intentions are good, constitutional limits do not bend to good intentions. If adopted, this proposal would invite years of litigation that Maine is unlikely to win.
The reason goes to the heart of why the United States Constitution was written.
The Articles of Confederation produced a destructive spiral: states levied discriminatory taxes against citizens of other states, retaliation followed and the national economy began to fracture. James Madison, in Federalist No. 42, identified this “beggar-thy-neighbor” dynamic as perhaps the most glaring defect of America’s first constitutional endeavor.
The Framers responded with two provisions, the Privileges and Immunities Clause and the Commerce Clause, designed to prevent states from treating citizens of other states as economic outsiders.
The Privileges and Immunities Clause is the first obstacle. While Article IV does not forbid every distinction between residents and nonresidents, it does forbid discrimination against out-of-state citizens with respect to core economic rights unless the state has a substantial justification and the discrimination is closely tied to that justification. A tax that says “same property, double the rate if you live in Massachusetts” would start any legal fight on shaky footing.
One caveat deserves acknowledgment. In one case, the Supreme Court allowed Montana to charge higher fees for nonresident elk hunters, reasoning that recreational hunting was not fundamental enough to trigger the clause. Perhaps a purely recreational vacation home in Maine would fall within the same category.
But the right to take, hold and dispose of property, and to be free from discriminatory taxation of it, has been recognized as a core privilege of American citizenship since the earliest days of the republic. Investment properties generating rental income stand on even firmer ground.
The proposal also runs headlong into the Dormant Commerce Clause. Maine attracts capital from Massachusetts, New York and beyond. Taxing the nonresident investors at a higher rate discriminates against interstate participation in the real estate market. That is exactly the kind of discrimination the Dormant Commerce Clause is designed to prevent.
Ironically, one of the Supreme Court’s leading cases on this issue comes from Maine. In Camps Newfound/Owatonna Inc. v. Town of Harrison, the Court struck down a Maine property tax exemption that favored organizations serving primarily Maine residents over those serving out-of-staters.
A tax that explicitly doubles the rate for those “from away” would likely fare no better. That precedent is not invulnerable, of course, but unless and until the Court overrules it, Camps Newfound remains controlling law.
Finally, Maine’s own constitution creates a third problem. Article IX, Section 8 of our constitution requires taxes on real and personal estate to be “apportioned and assessed equally according to the just value thereof.” A property tax that imposes different rates on identical homes because one owner sleeps in Rockland and the other sleeps in Wellesley is inconsistent with that guarantee. And while a state constitutional amendment could fix that, such an amendment would not overcome the hurdles imposed by Article IV or the Commerce Clause.
The housing problem is real. The urgency is real. The constitutional obstacles are also real.
Maine’s market is genuinely distorted by the concentration of second homes, many of them in nonresident hands, and the burden falls hardest on teachers, tradespeople and families trying to live where they work. But good intentions do not cure bad legal design, and there are better paths toward the same goal.
For instance, a tax that distinguishes homestead property from nonprimary residences, applied regardless of where the owner lives, would target the same distortion with far less constitutional exposure.
The Constitution does not require Maine to live with its housing crisis. It does require that the solution be designed to last.
