CAR TAX

Maine’s vehicle excise tax has long been viewed as unfair, in large part because it is based solely on a vehicle’s sticker price. Basing the tax on the vehicle’s value and taking into account depreciation, as calculated by a nationally recognized source such as the National Automobile Dealers, would help diminish these concerns.

Maine is one of 16 states that assess value-based taxes in lieu of property taxes. Twelve states allow local governments to tax vehicles as personal property. Most of these impose the same mill rates on both homes and vehicles. Although Maine is tied for Arizona for the highest initial tax rate (2.4 percent) for states with a uniform rate, states that allow municipalities and counties to set their own rates often charge more. In Virginia, for example, the statewide average is 3.6 percent and one locale in Rhode Island charges 5.4 percent.

In Maine, the tax starts at $24 per $1,000 of value based on the manufacturer’s list price for a new vehicle. The rate drops annually for six years to $4 per $1,000 where it remains as long as the car is registered. Lowering the rate, however, is an indirect way of addressing depreciation.

A better way is to base the tax on a vehicle’s value. A common way to do this is to rely on values in the National Automobile Dealers Association blue book. This works especially well for used vehicles because the NADA has already determined the value of such vehicles based on their trade-in value in the national market. One drawback is that the blue book makes adjustments for a car’s mileage, options and conditions. This could be mostly addressed by having an owner present the car’s sticker at the initial registration to show the car had leather seats and a DVD player, for example. The only variable would be mileage and condition, which are less important.

Bills that the Legislature’s Taxation Committee will hear next Tuesday try to address these concerns, but none do head-on. LD 79 would exempt new cars from the tax for a year. LD 459 would reduce the sticker price by $3,000. LD 558, which would implement recommendations from a years-old task force on the excise tax, would gradually reduce the top rate to $18 per $1,000. All would lower tax bills, thereby decreasing municipal revenues, without addressing the fairness problem.

Using the blue book, and its depreciation calculations, directly addresses concerns about being fairly taxed on a vehicle’s value whereas tinkering with the rates or prices paid are indirect ways to achieve the same goal.