June 17, 2018
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Groups criticize excise tax cut, TABOR II

By Rich Hewitt, BDN Staff

ELLSWORTH, Maine — Maine Municipal Association Tuesday continued its campaign to defeat two citizen initiative questions — the Taxpayer Bill of Rights II, or TABOR II, and the excise tax cut — that will appear on the Nov. 3 ballot.

About 30 people, most of them representatives from local town governments in Hancock County, attended the presentation, one in a series in towns around the state in which MMA and its collaborators are urging voters to vote no on questions 2 and 4 on the ballot.

Jeff Austin, a legislative advocate with MMA, led the charge describing the drawbacks of the excise tax proposal, which would reduce the excise tax on average by 55 percent and eliminate the sales tax and excise tax for three years on hybrid and other alternative vehicles.

Two key arguments in the presentation were that passage of the cuts in excise tax will result in the loss of revenues for towns and cities, and that the cuts will benefit relatively few motorists.

According to figures that Austin presented, the motor vehicle excise tax generates approximately $205 million statewide for local communities. Those revenues stay in the community where they are collected, he said.

“This is the second largest source of municipal — what we call ‘own-source’ — revenue after the real estate tax,” he said.

In 2007, the excise tax statewide raised $210 million; total local road expenditures totaled $235 million. In most communities, those excise tax revenues funds are dedicated to local roads, either by custom or by a binding vote at a town meeting. State law, Austin pointed out, does not require that those excise tax revenues be spent on roads.

If approved, he said, the cuts to the excise tax would reduce municipal excise tax revenues by $80,699,491, a loss of about 40 percent. Although the impact on individual towns will vary, the loss will generally be in the 40 percent range.

He added that each municipality will have to decide how to deal with that loss of revenue, but likely it will mean they will either have to cut services or increase the property tax.

Austin also argued that the cuts in the excise tax will benefit relatively few people. He referred to state figures that show that 68 percent of vehicles in Maine are more than five years old and would not be affected by the tax cut.

“They would see no rate reduction at all,” he said.

The TABOR II proposal also took it on the chin during Tuesday’s presentation by Rick McCarthy, vice president for government relations with Maine Tomorrow, a for-profit corporation that is part of a coalition of groups working with MMA to oppose the measure.

According to McCarthy, TABOR II is a revision of the original measure, which voters defeated in 2006. It would change the existing formulas that limit state and local spending and would require voter approval by referendum for spending over those limits and for increases in state taxes.

McCarthy pointed out that through LD 1, implemented four years ago, the state already has formulas for limiting spending increases. TABOR II would change those formulas for determining state, county and local caps and would mandate referendum votes for budget increases above those limits.

Because the proposed formulas are based on inflation, McCarthy said they will result in spending limits that will vary widely, making government less stable. In fact, based on 2008 figures, the state spending limits will be higher than under the current LD 1 limits. Next year, because of significant spending cuts this year in response to economic conditions, the cap on spending would see a correspondingly steep drop, he said. It also will lock in those low spending levels for years to come.

“It will make it difficult to come back from these historically low spending levels,” he said. “It will make it more difficult for the state to ever reach the 55 percent level for education.”

The requirement for referendum on state, county and local levels to exceed the spending limits will limit local control over how tax and budget decisions are made, McCarthy said.

“The requirement for a referendum vote is a recipe for chaos,” he said, “especially applied as broadly as TABOR II does.”

Most communities in Maine still are governed by the town meeting format of government, in which budgetary decisions are made by voters at the annual town meeting. TABOR II would require a second vote if the municipal budgets exceeded the spending caps set by the proposal.

“There is no better form of direct democracy [than the town meeting],” McCarthy said. “To require a second election in the towns doesn’t make any sense to us.”



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