Voters in November could have an opportunity to slash car excise taxes by nearly half, a possibility municipal leaders say would likely raise property taxes or lead to even more difficult budget problems.

A citizens’ initiative petition circulated by Maine Leads, a nonpartisan advocacy group based in Augusta, would cut automobile excise taxes by abut 50 percent for the first five years of registration for a car. Geoff Herman, director of state and federal relations for the Maine Municipal Association, said the first-year rate is now $24 per $1,000, based on the vehicle’s list price. Herman said the proposal would be advantageous to people buying new vehicles.

In Windham, Town Manager Tony Plante said the initiative would take nearly $1.1 million out of the town’s roughly $14 million budget. The town has already frozen spending and hiring, and is considering cutbacks and layoffs in order to balance the budget. Another cut could be devastating, Plante said.

“Without speculating on the exact nature of the council’s or community’s response to the proposed reduction in excise tax, cutting another million (dollars) would have serious consequences,” said Plante. “But so would shifting it to the property tax, which would mean another 60 cents or so on Windham’s tax rate,” an increase of about five percent.

Standish Town Manager Gordon Billington said his town would lose $600,000 in yearly revenues if the initiative passed in November.

“I think you’re going to have an impact on local property taxes, I don’t see any other way this could fall out,” Billington said. “You can only cut services so far. We’re already facing a budget shortfall next year of $300,000”

But Chris Cinquemani, director of government relations for Maine Leads, said recently people are calling for tax relief and efficient governments.

“Doom-and-gloom scenarios are just a way to scare the people,” Cinquemani said.

The citizens’ initiative needs 55,087 valid signatures. Cinquemani said the petition has more than 70,000 signatures and he’s confident it will meet requirements.

Deputy Secretary of State Julie Flynn expects the petition certification process to be complete by Feb. 23.

“We’re working on certifying names,” Flynn said recently.

Tom Brown, executive director of the Maine Automobile Dealers Association, said the association hasn’t seen language of the excise reduction proposal. Brown said the excise tax is a significant expense for an individual buying a new car but he said the group recognizes the municipalities’ need for revenue.

“There needs to be a balance,” Brown said.

Herman said that the measure, if passed in a November referendum, would go into effect in January 2010.

Billington said it’s worrisome that the initiative could take effect halfway through the fiscal year and after the town sets property tax levels. He said the only way to make up for such a significant drop in revenue would be to lay off town employees.

This year, Billington is predicting the town to take in $1.4 million in excise taxes, $100,000 less than originally projected. Excise tax revenue is spent on maintenance and repair of local roads, Billington said, and is the town’s primary source of income, besides property taxes.

In Bridgton, Town Manager Mitchell Berkowitz predicted that if the referendum passed, it would reduce the town’s excise tax revenues from $775,000 to $419,000.

“Simply, for each dollar a citizen saves, the town loses a dollar and must either cut the service or increase the tax rate,” Berkowitz wrote in a memo to selectmen. “The most expensive vehicles make out the best.”

Other town managers, too, were concerned that it was mainly those who buy the most expensive cars who would realize the savings.

“What’s a little disconcerting for me is those who buy the most expensive vehicles get the greatest benefits,” said Casco Town Manager David Morton.

Casco takes in $590,000 per year in excise tax revenue, Morton said, adding that voters would have to decide either to cut back on road maintenance or raise property taxes if the referendum passed.

“It’s going to affect every community,” Morton said.

Windham Town Councilor Liz Wisecup said at a recent meeting that an excise tax cut would only end up hurting those residents who can least afford it.

“If that money is gone and has to be made up through taxes, the people that maybe can’t even afford a car are going to have to pay,” she said.

The residents who can afford a new car should pay the tax, not their neighbor who is trying to save money, Wisecup reasoned. “To me, (the excise tax) is like a user fee if you go to a park. If you don’t go to the park, you don’t pay.”

Herman said a statewide decrease would be $88 million among the 492 communities. “It’s a lot of money to take out of the system,” Herman said.

But Cinquemani said Maine ranks sixth highest among the 27 states in the nation that have excise taxes.

“Politicians have failed to create real tax relief people are calling for,” Cinquemani said.

The proposal also encourages environmental reforms, according to Cinquemani. For those purchasing energy-efficient vehicles like hybrids, there would be no excise taxes for three years.

Cinquemani said the Maine Heritage Policy Center wrote the language for the citizens’ initiative and Maine Leads spearheaded the drive to collect signatures. The petition was submitted to the secretary of state on Nov. 3.

If the petition has sufficient valid signatures, it would first go to the state Legislature. Flynn said legislators could either pass the measure or send it to referendum.

Brown said the current excise tax schedule was put into place decades ago and needs revision. Herman said cars were once subject to personal property taxes in municipalities but the excise tax enacted by Legislature replaced it in 1929.

Herman said the amount in excise taxes collected now is equivalent to what is spent for local roads.

“You would have a massive deterioration of the quality of Maine roads,” Herman said.


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