A bill being considered by the legislative Taxation Committee eventually would cut in half the tax that residents pay to towns and cities to register motor vehicles, a change that supporters say would help the poor but opponents say would threaten a key revenue stream for cash-strapped municipalities.
L.D. 26 would reduce the excise tax on motor vehicles by 10 percent of its current amount each year for five years, until the rate is cut in half by 2022.
Opponents say that would only boost local property taxes, while supporters say it addresses the “unfair nature of the excise tax.”
China Selectman Ron Breton said in an interview that he sees the proposal as a “lose-lose” for towns and taxpayers. China collects about $800,000 in excise taxes each year, which is 64 percent of its total budgeted revenue, excluding property taxes, he said.
“If this bill were to pass, five years from now that $800,000 would be cut to $400,000,” Breton said. “That would be very detrimental to the town of China.”
Rep. Richard Cebra, R-Naples, said he submitted the bill after hearing from his constituents.
“Every dollar taken from the citizen is a dollar they earned and worked for,” he said Thursday at a hearing on the bill held by the Taxation Committee. The idea behind the bill is to reduce the tax burden on Mainers, he said.
Money from the excise tax is meant to go toward road maintenance and repair, although no laws mandate that towns set the money aside for that purpose. However, there is state data that shows Maine towns spend more on road repairs than they take in from excise taxes.
During Thursday’s hearing, Sen. Justin Chenette, D-Saco, asked how Cebra would respond to communities that are concerned about the potential revenue loss. Cebra said he thinks there is a problem with “the way the whole system is set up right now,” touching on issues such as revenue sharing between the state and towns and property taxes.
Cebra also said that “if there’s a will to keep your municipal spending in check, you can do it,” though he didn’t offer a specific solution for replacing that revenue.
But Breton, the selectman from China, noted that his town has kept the municipal tax rate at $15.50 per $1,000 of assessed property value for the past five years. The $400,000 loss the town would face with the bill would equal an increase of $1 per $1,000. The China Board of Selectmen is against the bill, Breton said.
China Town Manager Dan L’Heureux said the town wouldn’t be able to neglect its infrastructure, which is what it uses excise tax money for, so the cost probably would shift to property taxpayers.
“People in the Legislature talk about property tax relief. Well, this is the opposite,” L’Heureux said.
Skowhegan Town Manager Christine Almand said the town received $1.49 million in excise tax revenue in the year that ended June 30, 2016. The town usually budgets about $2 million for total revenue, excluding property taxes, so the excise tax is “very significant,” she said.
While Almand said she couldn’t comment on the bill, she said that “any time you lower one tax, you’re going to increase another.”
A supporter of the bill spoke about the effect the excise tax has on poor Mainers.
Matt Gagnon, CEO of the conservative Maine Heritage Policy Center, said at the hearing that Maine has one of the highest excise tax rates in the country. A number of states don’t have excise taxes at all.
“Maine’s motor vehicle excise tax hurts the poor,” he said, adding that owning a car in the many rural areas of Maine is often necessary for having a job or getting education.
Gagnon asked the committee to amend the bill to make the reduction optional for cities and towns, which would increase local control over revenue and potentially increase competition among towns, he said.
David Little, tax collector and deputy treasurer for Bangor, spoke against the bill, saying the money is needed to repair roads.
“Any reduction in the excise tax will result in either increased property taxes or reduced services for road repairs,” Little said. As an urban center, Bangor has more than 65,000 commuters using its roads, and only about one-quarter of them are city residents. If the excise tax were reduced, it would shift the cost of maintenance even more onto property taxpayers, who he said “are already paying a disproportionate amount for that maintenance.”
Bangor collected about $6.2 million in excise taxes in the year that ended June 30, 2016, Little said.
Madeline St. Amour can be contacted at 861-9239 or at:
mstamour@centralmaine.com
Twitter: @madelinestamour
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