The effect of proposed excise tax changes: a municipal point of view
There is proposed citizens' initiative to revise the existing State of Maine motor vehicle excise tax system. Please take a moment to consider a municipal perspective on this issue.
First of all, let's establish a basic understanding of what motor vehicle excise tax is and how it works...
For most Maine municipalities, the collection of motor vehicle excise tax represents a significant portion of the municipal revenue stream. Simply put, a large percentage of the budgeted expenditures depend on these collections. These funds are used by cities and towns to fund municipal activities (i.e. police and fire services, street repairs, etc.)
Excise tax is calculated based on the original Manufacturer's Suggested Retail Price (MSRP) - also known as the "sticker price" - of the vehicle being registered. So, not necessarily what you paid to buy that car or truck - but the standard price that the vehicle was listed for every purchaser... all deals, trade-ins, rebates and bargaining aside. This is important to understand because it means that everyone gets "treated the same" as far as excise tax is concerned - owners of the same vehicle pay the same excise tax, regardless of income or economic changes in the market, making excise one of the state's more "equitable" or fair taxes.
The MSRP is then taxed at a gradually declining rate, starting at the highest rate for the vehicle's year of manufacture, and then going down each year thereafter. So, a 2009 vehicle will be taxed at a rate of $24 per thousand of its MSRP. But the next year, as the vehicle depreciates in value, the excise rate goes down, as well.
The pending legislation, as currently written, would modify the excise tax system such that the excise rates would be lower for each year of registration until the vehicle's sixth or subsequent year. Thus, a person buying a brand new car would pay at a lower rate the first through fifth year; but a person registering an older vehicle (model year 2004 and after) would pay at the same rate as they do now. This legislation has the intended purpose of reducing the excise tax burden, however, it offers relief for taxpayers who can afford a new car purchase, but, does not reflect any cost savings for those who either can't afford a new model or chose to drive an older model.
As noted earlier, municipalities generate revenue to fund city services, such as the Police and Fire Departments, as well as to support the local school systems. Major sources of revenue for cities and towns are:
State distributions (education subsidy, program-specific grants and municipal revenue sharing);
Licenses and permits (e.g. building, plumbing and electrical permits; canine licenses; business licenses and franchise fees);
Property taxes; and
Excise taxes.
Here are some facts regarding the 2009-2010 budget year (July 1, 2009 - June 30, 2010):
The State of Maine has proposed reductions in several sources of municipal revenue, including but not limited to municipal revenue sharing, business equipment tax reimbursement program, residential property tax "circuit breaker", and Maine tree growth funding.
License and permit revenues have declined due to the economic and real estate market downturn.
If excise income is cut by the estimated 50% proposed; the City of Saco would experience a reduction in revenue of over $511,000 in fiscal 2009-2010 and over $1,000,000 for each subsequent year.
Thus, if school funding and city services requirements remain consistent, the loss in excise tax revenue will have to be covered by either an increase in other income sources or a reduction in municipal expenditures (loss of services).
Bear in mind that while state and other revenue sources decline, municipal expenses continue to rise (e.g. salt and asphalt to maintain roads). So, although the City of Saco and other Maine communities continues to develop creative solutions to meet citizens' needs without a decline in the quality of service that you have come to expect - we ask that you please consider the potential impact that this proposed legislation could have on your community and the effect that these changes could have on the level of service provided by all Maine cities and towns.
GIS MAPPING
You can now research property lots through the city's Geographic Information System (GIS) maps. Just follow this link. Note: This will take you off the City of Saco website.
