Maine’s Automobile Excise Tax Hurts the Poor and Elderly

Read the full report | It is interesting to note that twenty-two states and the District of Columbia do not assess any Automobile Excise Tax, that Maine’s Automobile Excise Tax is the seventh-highest in America, and third-highest in New England. The current rates for this tax (based on the MSRP “sticker” price instead of the actual transaction price) are 2.4 percent for the first year; 1.8 percent the second year; 1.4 percent for the third year; 1.0 percent for the fourth year; 0.7 percent for the fifth year and 0.4 percent for the sixth and subsequent years. For a vehicle with a $28,000 sticker price, this adds up to $2,044 paid in Auto Excise Taxes for the first five years of ownership. This is in addition to the Maine Sales Tax, which is 5 percent paid on the transaction price for all new and used vehicles.

Maine’s Auto Excise tax is a flat tax, in that the rates apply indiscriminately to all car owners without regard to income or other factors. According to data from Maine Revenue Services, the Auto Excise Tax is also the least “exportable” tax, meaning that 100 percent of these tax revenues are paid by Maine residents.

The combination of high Auto Excise Tax rates, the flat nature of this tax, the application to Maine residents only and the demographics of Maine, a lower-income state with an aging population, means that this regressive tax has the greatest impact on those least able to afford more taxes.

Data from the 2007 Consumer Expenditure Survey, published by the U.S. Department of Labor’s Bureau of Labor Statistics, shows that Maine’s Automobile Excise Tax most hurts the poor and elderly. Chart 1 shows that consumers, who are in the lowest 20 percent of income-earners, spend 4 percent of their income on new cars, which is a greater percentage than the remaining 80 percent.