Federal excise-tax hike could cost Maine nearly $28 million over 5 years

WASHINGTON — If President Bush and Congress cut a deal to increase federal excise taxes, Maine’s gasoline, cigarette and alcohol tax revenues would decline by nearly $28 million during the next five years, the National Conference of State Legislatures said Tuesday.

Senate Majority Leader George J. Mitchell and the other congressional leaders said Tuesday that they will meet daily with White House budget negotiators in an attempt to reach a compromise that reportedly would reduce the federal deficit by $50 billion to $60 billion prior to Congress’ scheduled Aug. 10 recess.

Without a budget agreement, the Gramm-Rudman law would mandate across-the-board cuts in federal programs totaling $100 million on Sept. 30.

Budget negotiators are said to be considering a plan that would combine about $30 billion in spending cuts with a $25 billion to $30 billion hike in taxes, most of them federal excise taxes.

Lee Daniels, president of the NCSL, warned that such proposed federal excise increases would cause a $4.3 billion plunge in state excise-tax collections during the next five years.

That projection was done by the KPMG Peat Marwick Policy Economics Group, a consulting firm that also has estimated Maine tax revenues for Gov. John R. McKernan.

The analysis assumes that Congress will increase the federal tax on gasoline from 9 cents to 15 cents per gallon; the tax on cigarettes from 16 cents to 32 cents per pack; the tax on beer from $9 to $18 per barrel; and federal taxes on distilled spirits from $12.50 to $14.50 per gallon.

Under that scenario, Peat Marwick projected that Maine’s cigarette tax revenues would decline by $7.5 million; gasoline revenues by $19.2 million; and wine and beer revenues by $1 million, for a total of $27.7 million during the next five years.

According to Daniels, higher levels of taxes on beer, gasoline and cigarettes invariably drive down overall sales on those commodities, resulting in lower levels of revenues for all levels of government.

Higher federal excise taxes, he said, also take away a major avenue for the states to meet their own budget crises.

“Increased federal excise taxes,” the NCSL president said, “are an incroachment on a traditional source of state revenue. State legislators fully support current efforts to reduce the federal deficit … (but) negotiators must understand that states cannot accept proposals that would result in damage to state fiscal systems, especially at a time when the federal government continues to reduce aid to states and increase mandates on states.”

Daniels pointed out that federal aid to states and local governments decreased from $106 billion to $92 billion in inflation-adjusted dollars during the 1980s. At the same time, Congress mandated additional financial obligations totaling $50 billion by some estimates.