ABBOT, Maine— The opposing sides of excise tax reform are preparing to duke it out in the public before a proposed reform package is presented on the November ballot.
The reform proposal, known as LD 974, would reduce excise taxes on new vehicles and would eliminate the first three years of excise taxes on highly energy-efficient vehicles, such as new hybrid gasoline-electric vehicles. In addition, 100 percent of the sale or lease price of these energy-efficient vehicles would be exempt from the sales tax.
The Maine Heritage Policy Center drafted the proposal and the not-for-profit Maine Leads recruited about 350 volunteers to collect more than 70,000 signatures to place the proposal before the Legislature and subsequently before Maine residents, according to Chris Cinquemani of the Maine Heritage Policy Center.
The bill, which was aired in April before the Legislature’s Taxation Committee, received an “ought not to pass” vote. That move and no action by Gov. John Baldacci will send the proposal to referendum.
“We have the seventh-highest excise tax rate in the entire country and 22 other states don’t even have an excise tax,” Cinquemani said Wednesday. “This is the most hated tax in Maine, [so] we decided to target this tax as a way to provide citizens with local tax relief.”
Opponents, however, say the excise tax reduction would shift more onto property taxpayers. The excise tax, which was created in 1929 and was amended just once, has been used over the years for the upkeep of roads, said Geoff Herman, Maine Municipal Association’s director of state and federal relations.
If the referendum is passed, excise taxes would be reduced by 40 percent leaving a loss of about $85 million in revenue, Herman said this week. “That money is going to come from somewhere, and if it doesn’t come from this particular source, it’s probably going to come right from the property tax itself, so that’s a concern,” he said.
Abbot Town Clerk Lorraine Leeman, agrees. “The supporters are making it sound like it’s a real savings when it’s just going to shift taxes from one pocket to another,” she said recently. Abbot collected $112,830 in excise taxes in 2008, of which $87,000 was used for winter roads and $25,830 for town road improvements, she said.
“You mess with it too hard and all you’re doing is putting it on the backs of the property owners, some of whom don’t even own vehicles,” Leeman said.
Herman said the proposal offers no tax benefit to residents who own cars more than 5 years old, which represents nearly 70 percent of the cars registered in Maine.
All residents will get some tax relief since cars last only so long before a new one needs to be purchased, Cinquemani said.
Cinquemani said the most popular car purchased in Maine last year was the Ford Focus. In 2008, the owner of a Ford Focus would pay a total of $1,114 over the first five years of the vehicle’s life. The owner would pay $499 for the same period under the proposed change, he said.
Waterville Mayor Paul LaPage said the “proof is in the pudding.” Excise taxes were down in most communities this year, but Waterville still was able to maintain the roads and lower taxes, he said. The excise tax collections in his community are placed into the general fund to help support all services.
Cinquemani said there is nothing in statute that requires excise tax collections be used for road maintenance.
“For small, rural towns like mine,” Leeman said there are two sources of revenue: property tax and excise tax. “In our town, every penny of excise tax collected goes into maintaining the roads, from plowing and sanding in the winter to patching, grading and ditching in the summer.” Like Waterville, she said, her town also lowered its mill rate but depends heavily on the excise tax to help offset property taxes.
Leeman believes the majority of Maine residents can’t afford a new vehicle and won’t benefit from the reform proposal. She does believe, however, that mill rates for excise taxes on new vehicles should be adjusted downward, but not as drastically as proposed. She also believes that once a vehicle reaches a certain age, there should be a flat fee for the excise tax.
“At least with excise tax, everyone that owns an automobile and uses the roads is helping to pay for them and it’s not all falling on the backs of the property owners,” Leeman said.