Maine Municipal Tax Collectors' & Treasurers' Association
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At our Executive Board meeting yesterday we felt that an update should be sent out regarding the status of LD 2270. For those of you who may not know, LD 2270 recommends a change to the excise tax mil rate structure as well as changes to the excise tax reimbursement program.  The LD seemed to be quickly prepared and discussed by the Taxation Committee and was voted “ought to pass” last Friday by a vote of 7-3.  Due to the quick scheduling of the LD I don't believe that many communities were aware of the proposal or the impact it may have.  The split vote opens up a chance to have this bill killed on the floor if enough communities contact their State representatives and express their concerns regarding the bill.

The mil rate change would be as follows:

Year of registration                   Current Mill Rate                      Proposed Mill Rate

                                                 (applied to MSRP)                  (applied to MSRP)

1                                              24                                            21

2                                              17.5                                         18

3                                              13.5                                         15

4                                              10                                            11.5

5                                              6.5                                           7

6                                              4                                              4.5

7                                              4                                              4

8                                              4                                              3.5

The mil rate change came from a report prepared by an Excise Tax Study Group.  The group consisted of representatives from several communities, the Department of Motor Vehicles, MMA, Maine Revenue and the Maine Dealer's Association. The Group compared Maine 's excise tax structure to other state's and after reviewing the information, it was decided that Maine 's excise tax procedures are not as “out of line” as people like to think it is.  Basing excise tax on MSRP is both fair and equitable to ensure equal taxation throughout the State and Maine 's average excise mil rate is comparable to other State's.  Based on these findings the entire Study Group voted recommended that the excise tax structure stay the way it is.  Knowing the large number of excise tax change proposals brought before the State Taxation Committee each year the Study Group felt compelled to include in the report an alternative mil rate structure as an option if the Taxation Committee felt something “had to be done”.  The new rate structure was designed to have as minimal as possible impact on revenues.  Motor Vehicle estimates were that the new rates would reduce excise revenues by roughly 1.6% ($3,000,000) State-wide. My understanding is that when the report was presented to the Taxation Committee it was presented as though the Study Group recommend the new rate structure.  It snowballed from there into a LD and now is on the verge of becoming law.  

The Study Group did not include in it's report anything regarding the excise tax reimbursement program, however, Motor Vehicle apparently was able to add on to the proposed bill a change to the program that is also now close to passage.  I believe that Motor Vehicle feels the change will not have a negative effect on municipalities which is incorrect.

The excise reimbursement change is that any vehicle in the reimbursement program will be taken out of the program when it reaches its eighth year.  At the eighth year renewal the municipality is supposed to re-price the vehicle back to the MSRP and will no longer receive reimbursement from the State.  One of Motor Vehicle's arguments in favor of the change was that with the proposed mil rate change the customer would pay 4 mils during year seven based on sales price and then 3.5 mils in year eight based on MSRP.  The drop in the mil rate is supposed to make up the difference so that the customer doesn't end up paying more excise tax.  Looking at the vehicles in Bangor , most of them would end up paying more excise tax in year eight and I am not looking forward to trying to explain that to our customers.

The Executive Board urges you to contact your State representatives soon regarding LD 2270.  The bill will probably go to the floor within the next couple of weeks so there is a bit of urgency in expressing our concerns.