Do you want to cut the rate of the municipal excise tax by an average of 55 percent on motor vehicles less than six years old and exempt hybrid and other alternative-energy and highly fuel-efficient motor vehicles from sales tax and three years of excise tax?
Paying less excise tax when you register your car each year likely sounds appealing to most Mainers. Passing Question 2 on the Nov. 3 ballot won’t lower most people’s taxes, however, which is one of the reasons this ballot measure should be defeated.
More than three-quarters of the cars registered in Maine are 5 years old or older. The owners of these cars won’t see their excise tax rate cut at all if Question 2 is passed. Backers of the initiative say the excise tax hurts poor people. Their solution would make the situation worse by giving tax breaks to those who can afford new cars and hybrid cars while doing nothing for the vast majority of Maine residents.
Chris Cinquemani, chairman of the Yes on 2 campaign, said the group sought to lower the vehicle levy because it is a “hated tax.” It is true that the excise tax is especially reviled, likely because car owners must write a check to their town to cover it as part of their annual vehicle registration. If the first year’s tax were rolled into the price of a new car, the outrage would likely be lessened.
More to the point, however, a tax’s popularity shouldn’t determine its value. Excise tax revenue is important to towns. Reducing the excise tax by more than half for cars less than 6 years old would leave a large gap in municipal budgets. Statewide, the change would cost municipalities $82 mil-lion a year, according to the Maine Municipal Association. In most communities, the lower excise tax would mean about a 10 percent decrease in revenues. In Bangor, that would mean about $1.8 million less per year and in Orono $600,000 less.
Because the excise tax revenue is generally used to pay for municipal road and bridge maintenance and repair, cutting the tax would result in worse roads or an increase in property taxes, the only other source of revenue controlled by local government.
While encouraging the purchase of hybrid and fuel-efficient vehicles is laudable, this portion of the referendum question comes off as an afterthought. Although one of the groups supporting Question 2 calls itself More Green Now, the backers of the initiative often have to be reminded to talk about the supposed environmental benefits of the measure.
Hybrid and alternative fuel vehicles and those that get more than 40 miles per gallon would be exempt from sales tax and the first three years of excise taxes if Question 2 passes. Generally, these vehicles cost much more than the cars that the typical Maine family buys.
A tax break for the small minority of Mainers who buy new or hybrid cars isn’t worth the cost this initiative would impose.