In an April 27 OpEd, “Auto excise tax reform would help working families,” Rep. David Cotta, R-China, advocated for a cut in the automobile excise that supports municipal operations. The excise tax initiative is being spearheaded by a tax-exempt advocacy group called the Maine Heritage Policy Center. This is the same group that spearheaded the failed TABOR initiative two years ago and is running another TABOR initiative this year in addition to the excise tax ballot question. Rep. Cotta’s piece parroted arguments put forth by this organization in support of slashing municipal revenues.
I cannot speak to the Heritage group’s analysis of statewide figures. I can speak to the impact in the town of China.
The total excise tax in 2008 was approximately $752,000. The ballot question will cut the excise rates by an average of 40 percent and would reduce China’s revenues by $290,000.
The total municipal budget in 2009 was just over $10.7 million. As a percentage of the total town, school and county budget, the loss of excise tax revenue would be less than 3 percent. That said, finding another $290,000 in cuts today would be a tough challenge given that all other revenue sources are under such a strain. For example, revenue sharing could be reduced by 15 percent; the homestead exemption could be reduced by 10 percent; tree growth reimbursement could be reduced by 15 percent; and so forth.
However, most of the budget does not fund services controlled by the town of China. In 2008, the municipal portion of the budget, excluding the school and county budget, was approximately $2 million. As a percentage of the municipal portion of the budget, the excise tax loss could equate to 14.5 percent.
Rep. Cotta believes that we “need to demand a responsible fiscal budget policy from our cities and towns like we demand from state government.”
First, the reduction in the automobile excise tax would only impact municipal finances; it does not impact the state’s revenues at all. What similar piece of remotely viable legislation is Rep. Cotta supporting that would reduce the revenues available for state functions by 14.5 percent?
Second, does anyone really believe that municipal governments would not be forced to raise the property tax (mil rate) if forced to absorb the excise tax revenue reductions noted by Rep. Cotta on top of the other reductions in state assistance as outlined in the governor’s most recent reductions in state assistance to municipalities?
Moreover, other hardships in the form of increased costs are passed on to municipalities from forced actions. For example, a few years ago the state government forced the consolidation of public safety dispatching. China and other municipalities were herded into the state-operated dispatching center in Augusta. What is the result? The state is demanding a 46 percent increase next year in the fees we pay to receive this service. If excise taxes are cut by 40 percent, can China cut its payment to the state dispatching center?
Third, as everyone knows, the revenues generated by automobile excise taxes are primarily used to provide road-related services. In China, our total road and bridge construction and maintenance budget was approximately $600,000 in 2008. If the amount of revenue from the auto excise tax declines by nearly $300,000, it won’t be the schools or public safety dispatching that will take the hit; it will be the repair and maintenance of China’s roads and bridges.
Finally, Rep. Cotta does not address the regressiveness of the proposed change in the excise tax rates.
Times are tough for Maine families. This year’s budget in China is approximately $1.98 million. It is understandable why some individuals will want to cut their taxes. However, I believe a reduction of 14.5 percent in municipal revenues in excise taxes alone is simply too steep given the other cuts we are facing, as well as the new mandates from Augusta. We urge voters to reject a 40 percent cut in excise taxes.
Irene L. Belanger is the chairperson of the China select board.