Maine Can Do Better

  2009 Referenda Information 

Fact Sheet on the Ballot Question to Reduce the Excise Tax

What is the motor vehicle excise tax? The excise tax is an annual tax that must be paid prior to registering a vehicle. The tax is defined in State Statute as a tax levied annually for the privilege of operating a motor vehicle or camper trailer on the public ways. In practice, it is provides towns with revenues they need in order to maintain local roads and bridges, and to keep the roads plowed and sanded in winter. By specifically taxing vehicle owners, the excise tax ensures that the people who use Maine’s local roads help pay the costs associated with maintaining this infrastructure.

The Maine Municipal Association estimates that the referendum measure would reduce town revenues by a cumulative $88 million each year. This loss of revenue would translate into fewer dollars for roads and snowplowing. Because the need to maintain local roads will not diminish, the likely outcome is that towns will need to increase property taxes to fill the gap.

Who pays the excise tax? All vehicle owners pay the excise tax. Owners pay this tax to the towns in which they live. The amount each owner pays depends on the value and the age of the vehicle(s) they own. The value for new cars is determined by its Manufacturer Suggested Retail Price (MSRP). The value of used cars is determined from the NADA Guide or the Automobile Red Book or Blue Book (we probably could cut this). Currently, people who own expensive, newer model cars pay a far higher tax than do people with older, less valuable vehicles.

How does the excise tax work? Each year, towns collect the excise tax due on the vehicles registered to people living in that town. All of the revenues from the excise tax are collected and spent locally. The towns, however, do not set the tax rates which determine how much each vehicle owner is required to pay. These rates are set by the Maine State Legislature. Currently, these rates are as follows:

• The owner of a one-year old car will pay $24.00 for each $1000 their car is worth.
• The owner of a two-year old car will pay $17.50 for each $1000 their car is worth.
• The owner of a three-year old car will pay $13.50 for each $1000 their car is worth.
• The owner of a four-year old car will pay $10.00 for each $1000 their car is worth.
• The owner of a five-year old car will pay $6.50 for each $1000 their car is worth.
• The owner of a car six or more years old car will pay $4.00 for each $1000 their car is worth.

As an example, the owner of a three-year old car with an MSRP of $19,500 will pay $263.25 ($19,500 x .0135) to the town in which he or she resides.

What will the referendum change? The proposed measure would reduce the excise tax on newer model vehicles, cutting the current rates in half for the first three years of a vehicle’s “life”. In the fourth year, the rate would drop to $4 for each thousand dollars of value and remain constant for all subsequent years.

In addition to these changes in the excise tax rates, the measure would exempt “green” vehicles from the sales tax (paid at the time of purchase) and from the first three years of excise taxes. “Green” vehicles would be defined as hybrids vehicles as well as those vehicles that get over 40 MPG/highway.

What will the effects be? Those town residents with newer model (and therefore more expensive) cars would see their excise taxes decline significantly. Residents with vehicles more than five years old cars would get no benefit from the proposed changes. In fact, it is very likely they would see increases in their property taxes to make up for the lost excise tax revenue.

Courtesy of The Maine Center for Economic Policy

Fact Sheet on TABOR II

What is TABOR?

TABOR is a state tax and expenditure limit that includes the following elements: it is a constitutional amendment; it restricts revenue or expenditure growth to the sum of inflation plus population change; and it requires voter approval to override the revenue or spending limits. In Colorado, where the so-called “Taxpayer Bill of Rights” or TABOR was adopted in 1992, public services have deteriorated significantly. For example, between 1992 and 2001, Colorado declined from 35th to 49th in the nation in K-12 spending as a share of personal income. Colorado now ranks 48th in higher education funding as a share of personal income— down from 35th in 1992. Between 1991 and 2004 — a period in which the percentage of children who are uninsured declined nationally — the proportion of low-income children who lack health insurance in Colorado doubled. Colorado now ranks last in the nation on this measure. In addition, between 1992 and 2002, Colorado declined from 23rd to 48th in the nation in access to prenatal care, a sign of funding shortages in local health clinics.

Allowing revenue or expenditures to grow with population and inflation may sound reasonable, but it falls far short of being able to fund the ongoing cost of government. In an era in which health care costs are growing far faster than inflation and populations are aging, limiting the rate of spending growth to inflation plus population growth forces annual reductions in the level of government services.

TABOR shrinks the scope of what government can accomplish and creates conditions that each year pit programs and services against each other for survival. And once such limits are embedded in a state constitution, they usually cannot be removed or modified. They undermine existing services for children, youth, and families and make any new initiatives virtually impossible to undertake.

In Colorado- the only state with a TABOR, voters decided in November 2005 to suspend their TABOR amendment for five years so that the state could begin restoring cuts in public services and avoid making even more drastic cuts. Yet organizations dedicated to shrinking government — such as Grover Norquist’s Americans for Tax Reform, Americans for Limited Government, the CATO Institute, and Americans for Prosperity Foundation, among others — are still pushing for the adoption of TABORs in other states. In 2005, TABOR proposals were introduced in about half of the states -- none passed. In 2006, TABOR legislation and ballot initiatives were pushed aggressively in at least a dozen states. In five of these states, signatures were turned in for initiatives, but the initiatives were thrown out by the courts. In three states, TABOR initiatives did make the ballot, but were soundly defeated.

Note: the 2009 TABOR measure in Maine proposes amending statute, not the statet constitution. Additionally, many of its provisions apply to the operations of municipal government, not just the state.

Courtesy of The Center on Budget and Policy Priorities

State Budget Information

The Legislature's Appropriations and Financial Affairs Committee unanimously approved a two year budget for the 2010 and 2011 fiscal years. This budget also included supplemental spending for the current fiscal year, which ends June 30.

The Office of the Speaker of the Maine House of Representatives prepared an overview of the budget: click here to download a pdf of this document.

The Maine House and Senate are expected to debate and vote on the budget bill early next week.