AUGUSTA, Maine — Lawmakers got a sneak peak Thursday at what is likely to be a heated political campaign later this year over a ballot proposal to slash the excise taxes that municipalities collect from vehicle owners.
In November, voters likely will weigh in on a referendum question proposing to cut in half the excise tax paid on new vehicles as well as reduce excise taxes paid on 2- and 3-year-old vehicles. The proposal would also exempt hybrid cars from the excise tax altogether for the first three years of the vehicle’s life.
But first, legislators and Gov. John Baldacci are being given a chance to head off the referendum by approving the measure as written.
“It’s going to go to the voters,” said Sen. Joseph Perry, a Bangor Democrat and co-chairman of the Taxation Committee. “We’re not going to pass this bill.”
Nonetheless, members of the Taxation Committee heard hours of testimony from people on both sides of the issue on Thursday.
Supporters argue that drastically reducing the excise taxes on newer cars will keep an estimated $80 million in Mainers’ pockets and will encourage purchases of fuel-efficient and cleaner-burning hybrid vehicles.
Opponents, including the Maine Municipal Association, counter that slashing the excise tax will only force municipalities to either raise property taxes or put off the critical road repair and maintenance projects that the tax revenue funds.
“There is no way we can afford that kind of cut in Litchfield without raising property taxes,” said Mike Byron, town manager and road commission for the community southwest of Augusta.
The referendum and associated bill, LD 974, were drafted by the Maine Heritage Policy Center, a conservative research and educational organization based in Portland.
Tarren Bragdon, the center’s CEO, said Mainers were promised that their local taxes would decline when voters approved a ballot measure increasing the portion of educational funding supplied by the state. While the state has funneled additional money into schools, local property taxes continue to climb faster than inflation, Bragdon said.
“Maine people deserve real tax relief and frankly they have been promised it for many, many years,” he told committee members.
“The promise was made. The promise wasn’t kept,” added Roy Lenardson, executive director of the organization Maine Leads.
But municipal officials from throughout the state predicted that slashing excise taxes on newer cars would have dire consequences in their towns.
George Finch, Eastport’s city manger, said towns such as his are already struggling to cover their road maintenance and repair obligations because excise tax revenues are shrinking. Eastport used to have five people on its highway crew but is now down to three, he said.
Prices for asphalt, road salt and diesel have all risen, he said. Without additional revenue, the city would be forced to tap into the 18 percent of its budget that pays for police and other essential services to cover the estimated $65,000 reduction as a result of LD 974.
“Reducing excise taxes does little more than pass the burden onto the property tax payer,” Finch said.
Few Taxation Committee members appeared supportive of the proposal.
Committee co-chairman Rep. Thomas Watson, D-Bath, pointed out that four other bill proposing what he described as “good ideas” on the excise tax were also pending with the committee.
But because of the pending citizen referendum, the committee is effectively barred from acting on those bills this year.
“We can discuss them, but we can’t do a thing about them,” Watson said.
The committee is expected to hold a work session on LD 974 next Wednesday.