Anyone who has registered a vehicle in Maine has felt the pain of excise tax, the municipal tariff enacted by the state Legislature in 1925 to fund local public works budgets and road improvements.

Two organizations with a history of railing against Maine’s tax burden are behind an initiative to slash auto excise. Maine Leads, a grassroots organization based in Augusta and the Maine Heritage Policy Center, a Portland-based conservative think tank, have collected an estimated 70,000 signatures on a citizen initiative petition.

If the secretary of state verifies the signatures, the Legislature will be forced to either enact the proposal or send it to referendum. Supporters and opponents agree a statewide vote is more likely, meaning Mainers could soon have the power to reduce auto excise by 50 percent for the first five years a vehicle is registered.

“We all know Maine has one of the highest tax burdens in the country,” said Chris Cinquemani, public affairs director for Maine Leads.

“State and local politicians have offered nothing but gimmicks and tax shifts,” Cinquemani said. “They’ve failed to give us tax relief and now we’re rising up and giving it to ourselves.”

The bill also promotes the purchase of hybrid vehicles by eliminating the sales tax and first three years of excise on new purchases.

While the prospect of paying less in taxes may have broad appeal, town officials are cautioning against a measure they say is a bigger threat to municipal budgets and services than TABOR 2, the follow-up to the 2006 Taxpayer Bill of Rights that voters narrowly defeated.

Both TABOR 2 and the excise tax initiative could appear on the November ballot, and town officials believe that’s a dangerous proposition.

“I don’t think both will pass,” South Portland City Manger Jim Gailey said. “But my fear is people unsure about TABOR will see the excise (initiative) and think, why not?”

According to figures compiled by the Maine Revenue Service, auto excise tax accounts for an average of 10 percent of all municipal revenues in Maine. In 2005, municipalities collected more than $203 million in excise. At $47.7 million, Cumberland County brought in more than 23 percent of those collections, the most in the state.

Some communities in greater Portland predict a 40 to 50 percent drop-off in excise revenues if the citizen initiative is enacted.

Officials worry voters might not realize the correlation between excise taxes and public works budgets.

“If this passes, Freeport would lose about $600,000,” Town Manager Dale Olmstead said. “That’s basically our entire road-paving program.”

Other town officials added that shifting the cost for services from auto excise to property taxes would be inequitable.

“They’re essentially taking a user tax and forcing it into a property tax issue,” Cumberland Town Manager Bill Shane said, noting his town could lose $500,000 each year if the initiative passes. “Where else is that money going to come from?”

Cinquemani says that reaction is typical of municipal governments.

“We’ve been hearing the same argument from town politicians going back to TABOR,” Cinquemani said. “Any time somebody says they’re going to cut any of their revenue, it’s a doom-and-gloom scenario for voters: Roads will crumble and the sky will fall. … It’s unsettling to me because they’re saying, ‘We don’t want to take a look at how we’re doing business.'”

Frequently reported, but often disputed, rankings from the Washington, D.C.-based Tax Foundation have put Maine at or near the top of the nation’s list of states with the highest tax burdens.

While the Tax Foundation recently moved Maine from the top of its list to the upper third, conventional wisdom is that the state has a tax problem.

For that reason, both sides of the excise tax debate think the initiative has a good chance to be ratified by voters.

Of the three citizen initiatives introduced by Maine Leads and MHPC, Cinquemani said the excise tax generated the most excitement.

“When people register their cars in Maine and see how little residents in other states are paying, it’s pretty frustrating,” Cinquemani said.

Complaints about Maine’s excise tax rate – 2.4 percent for new vehicles – have raged for years. MHPC says Maine’s excise is the sixth highest in the country.

In 2002, a legislative panel headed by former Secretary of State Dan Gwadosky said the state was tied with Arizona as having the highest tax rate on new vehicles.

That claim was disputed in a 2008 report by the Joint Standing Committee on Taxation. It said some states don’t charge excise. Others, like New Hampshire, base registration charges on vehicle weight. And still others have calculations that make comparing Maine’s excise to other states difficult.

Mainers frequently complain that the state’s excise is based on sticker value of the car, rather than the amount paid. But according to the 2008 report, that method was adopted to ensure equity.

The report also recommends reducing the mill rate on new vehicles while raising it in the third, fourth, fifth and sixth years of ownership – a measure it estimates would result in a statewide municipal excise revenue reduction of more than $3 million, or 1.6 percent.

The Legislature could adopt the proposal to appease Mainers tempted to vote for the citizen initiative.


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