A bill under consideration by the legislative Taxation Committee eventually would cut in half the tax residents pay to towns and cities to register motor vehicles, a move that supporters say especially would help the poor, but opponents say it would threaten a key revenue stream for cash-strapped municipalities.

L.D. 26 would reduce the excise tax residents pay on motor vehicles by 10 percent of its current amount each year for five years, until the excise tax rate is cut in half by 2022. Opponents say it will only force local property taxes upward in towns both big and small, while supporters say this addresses the “unfair nature of the excise tax.”

China selectman Ron Breton said in an interview he sees the proposal as a “lose-lose” situation for towns and taxpayers. China collects about $800,000 in excise taxes each year, which is 64 percent of its total budgeted revenue, excluding property taxes, he said.

“If this bill were to pass, five years from now that $800,000 would be cut to $400,000,” Breton said. “That would be very detrimental to the town of China.”

Rep. Richard Cebra, R-Naples, said he proposed the bill after hearing from his constituents.

“Every dollar taken from the citizen is a dollar they earned and worked for,” he said during the public hearing Thursday afternoon held by the Taxation Committee. The idea behind the bill is to reduce the tax burden on Mainers, he said.

Money from excise tax collection is meant to go toward road maintenance and repair, although no laws mandating that towns set the money aside for that purpose. However, there is state data that shows that Maine towns spend more on road repairs than they take in as excise taxes.

During Thursday’s legislative hearing, Sen. Justin Chenette, D-York, asked how Cebra would respond to communities that are concerned about the potential revenue loss. Cebra said he thinks there is a problem with “the way the whole system is set up right now,” touching on issues such as revenue sharing between the state and towns and property taxes.

“You have enough bills to fix this whole problem, and this is just one piece of the problem,” he said.

Cebra also said that “if there’s a will to keep your municipal spending in check, you can do it,” though he didn’t offer a specific solution for how to replace that revenue whole for towns.

But Breton, the selectman from China, noted that his town has kept the municipal tax rate — $15.50 per $1,000 of assessed property value — flat for the past five years. The $400,000 loss the town would face with the bill would equal an increase of $1 per $1,000 of assessed property value. The China Board of Selectmen is against the bill, Breton said.

Breton also said this is not the right time for such a change. Potential changes in school funding and the decline in revenue sharing over the years, coupled with the loss of excise taxes, could hurt the taxpayer.

“It just doesn’t make any sense to me to do this at this point,” he said.

China Town Manager Dan L’Heureux said the town wouldn’t be able to neglect its road infrastructure, which is what it uses the money for, so the cost probably would shift onto property taxpayers.

“People in the Legislature talk about property tax relief. Well, this is the opposite,” L’Heureux said.

Skowhegan Town Manager Christine Almand said the town received $1.49 million in excise tax revenue during the 2015-2016 fiscal year. The town usually budgets about $2 million for total revenue excluding property taxes, so the excise tax revenue is “very significant,” she said.

While Almand said she couldn’t comment on the bill, she did say that “any time you lower one tax, you’re going to increase another.”

A supporter of the bill spoke about the effect the excise tax has on poor Mainers.

Matt Gagnon, the CEO of the conservative Maine Heritage Policy Center, said at the public hearing that Maine has one of the highest excise tax rates in the country. A number of states don’t have excise taxes at all.

“Maine’s motor vehicle excise tax hurts the poor,” he said, adding that owning a car in the many rural areas of Maine is often necessary for having a job or getting education.

However, Gagnon asked the committee to amend the language to make the reduction optional for towns, which would increase local control over revenue and potentially increase competition among towns, he said.

David Little, tax collector and deputy treasurer for Bangor, spoke against the bill, saying the money is needed to repair roads.

“Any reduction in the excise tax will result in either increased property taxes or reduced services for road repairs,” Little said. As an urban center, Bangor has more than 65,000 commuters using its roads, and only about one-quarter of those commuters are city residents. If the excise tax were reduced, it would shift the cost of maintenance even more so onto property taxpayers, who he said “are already paying a disproportionate amount for that maintenance.”

Bangor collected about $6.2 million in excise taxes in fiscal year 2016, Little said.

Waterville also would lose a substantial amount of its revenue should the bill pass. About one-third of its budgeted revenue comes from excise taxes.

“The threat to change anything with the motor vehicle excise collection is a huge, huge concern for the city of Waterville,” City Manager Michael Roy said in an interview Thursday. “Excise tax is our largest outside revenue source, surpassing state revenue sharing, now that the state has reduced our revenue sharing over the years. If that’s affected, it certainly will have an affect on property taxes and will make the funding of municipal services extremely difficult.”

In fiscal year 2016, excise tax made up about 32 percent of the city’s revenue, excluding property taxes and one-time fees. In fiscal year 2017, it made up about 30 percent.

Madeline St. Amour — 861-9239

mstamour@centralmaine.com

Twitter: @madelinestamour

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