Future of excise tax in question
Maine cities and towns face reduced revenues – and a November citizen referendum that could gut funds available for local roads.
Holden town manager John Butts is keeping a wary eye on the excise tax these days. With the slow economy affecting sales of new cars, a pending statewide voter referendum calling for a reduction in the excise tax in November and the town budget planning process underway, predicting the town’s share of excise tax revenues is proving problematic.
He said he plans to present two scenarios to his town council this spring. The first is based on status quo projections of the town’s excise tax revenues. If the referendum goes to vote and passes, “then I’ll start doing the amputations,” said Butts.
“We’ve gleaned out almost all the efficiencies from our budget that we can,” said Presque Isle Town Manager Tom Stevens. “If the city’s excise tax revenues are significantly reduced, the question may become, will we be able to continue to provide the current level of services, yes or no?”
In late February, Maine Secretary of State Matt Dunlap announced that a citizen’s initiative to reduce the motor vehicle excise tax had been certified. Of the 67,672 signatures collected by the tax advocacy group, Maine Leads, 56,546 of the signatures were declared valid. (The state requires 55,087 valid signatures to approve a citizen referendum.) Now, the Maine Legislature must approve the referendum before it is included on the November ballot.
On a new vehicle, the excise tax is $24 per $1,000 of the sticker price. The tax declines to $17.50 per $1,000 of the vehicle’s value in the second year; $13.50 in the third; $10 in the fourth; $6.50 in the fifth; and $4 in the sixth and remaining years of the vehicle. If the referendum passes, the rate for new cars will be slashed in half, and there is a provision to waive sales tax and the first three years of excise tax on high-mileage and hybrid vehicles.
In 2007, the excise tax on automobiles generated $207.9 million in revenue statewide. If passed, excise tax revenues are expected to decline by between 34 to 43 percent. (Maine Municipal Association estimates revenues will drop by $88 million; Maine Leads predicts a $77 million decrease.)
The excise tax, in theory, is a user fee. Towns are not required to use excise tax receipts on paving programs; still for many, there is a correlation between the rise and fall of excise tax revenues and the extent of a town’s paving program.
In many of Maine’s cities and towns, excise tax revenues have already been experiencing a decline as the region’s economy has slowed. In Holden, midway through the current fiscal year, town manager Butts said Holden had seen a 9 percent decline in excise tax revenues. He said that the town had already taken steps to absorb the drop. “Now, if the referendum passes, that’s going go hurt us quite a bit,” said Butts.
In Saco, Public Works Director Mike Bolduc said the city projects a $511,000 decrease in excise tax revenues in the city’s 2009-2010 budget if the referendum passes. The following year, revenue would fall off even more by approximately $1 million. That has many in Saco – and in other Maine towns – concerned about what will happen to their road programs. Bolduc said that, while excise taxes are not solely dedicated to the Saco’s road program, “our paving program is obviously going to suffer” if the referendum passes.