AUGUSTA, Maine — Members of the Legislature’s Taxation Committee are expected to hear spirited debate today over a citizen initiative that seeks to cut Maine’s automobile excise tax by more than 40 percent.
Proponents of LD 974, including conservative lobbying groups such as Maine Leads and the Maine Heritage Policy Center, believe that the bill would save up to $82 million in annual taxes for state residents.
Opponents, mainly the Maine Municipal Association, said the other side of that equation is: Cities and towns use that $82 million to pay for important things such as road and bridge maintenance.
The hearing is expected to be what Maine Leads Executive Director Roy Lenardson called “a dog and pony show,” in the sense that it won’t change either side’s minds.
“The Legislature can enact this,” he said of the citizen-led LD 974. “In fact, I dare them to.”
More likely, though, the Taxation Committee will not support this legislation, and it will be decided by Maine voters in November.
“We’ve been dancing around this issue for a couple decades and the Legislature failed to act,” Lenardson said.
In simple terms, the excise tax cut proposal would reduce the mill rate by about half depending on the age and value of a vehicle. Newer cars would see the biggest decrease in tax, while cars more than four years old would not see any decrease. A recent Maine Revenue Service study showed that 68 percent of vehicles registered in Maine are 5 years old or older. Because of the way the bill is structured, LD 974 would give tax break to new car owners but not the other 68 percent of Mainers.
The bill also calls for eliminating the 5 percent sales tax and first three years of car excise taxes on new hybrid vehicles or other vehicles that get more than 40 miles per gallon.
Michael Starn, executive director of the Maine Municipal Association, said his group is understandably displeased by the initiative. From his perspective, cutting a significant amount of revenue from towns will require either additional taxes to make up the difference or a decrease in services, neither of which is an appealing op-tion.
“There is a direct correlation between municipal public works budgets and excise tax revenue,” he said. “Many municipalities appropriate directly from excise tax.”
Starn estimated that the bill would cut about 10 percent of revenue for each municipality.
Bangor Finance Director Debbie Cyr said the proposal would result in a reduction of $1.8 million every year in her city. Excise tax represents 19 percent of all nonproperty tax revenue in Bangor.
Lenardson and others are counting on the poor economy to rile Maine voters enough to support this kind of tax cut. Starn and other opponents hope residents understand if this is approved, services will almost certainly have to be cut.
“At the local level, there is a much leaner and meaner approach to spending than what we might perceive at the federal or state level,” Starn said.
Lenardson countered that, in these economic times, “towns shouldn’t have to do with less, people should.”
The hearing on LD 974 will be held at 1 p.m. Thursday, March 26, in the State House.