Police and municipal officials in Connecticut are miffed that residents who owe property taxes are registering their cars in Maine to escape their debts. In Delaware, state officials are frustrated because they can’t collect unpaid tolls traced to Maine-registered trailers.
In a country where states do what it takes to be competitive, what’s clear is that Maine has found a competitive advantage that’s driving some other states crazy. A combination of low fees, convenience and rules that are lax in comparison with other states’ have effectively made Maine an auto registration haven.
Not quite an offshore tax haven, but it’s something.
Police in Connecticut say they’re noticing an uptick in residents driving around with Maine plates. They’re not Mainers flocking to the Nutmeg State for a brief winter reprieve. The Maine-plated cars, according to police, are driven by Connecticut residents who garage their cars in Connecticut.
Connecticut law bars drivers from registering their vehicles if they have unpaid property taxes. The way around it? Register your car in Maine. It doesn’t even require a trip north, just the proper documents, an online agent, and the required fees.
The source of friction? Under Maine law, it’s completely legal to register a car in Maine even if you’re not a Maine resident. But in Connecticut, registering your car in Maine is a legal breach. (Maine law, for what it’s worth, doesn’t work the other way around, either. It’s against state law for Maine residents to register their Maine-based cars in other states.)
Officials in Delaware have tried to bring attention to a similar plight. In 2013, Delaware’s Division of Motor Vehicles highlighted the fact that many of the vehicles flouting Delaware tolls had Maine-registered trailers in tow. Unlike Delaware, Maine doesn’t require that a person registering a trailer in the state be a resident. And since Delaware and Maine don’t have a toll collection reciprocity agreement, Delaware authorities can’t pursue the owners of Maine-registered trailers for their unpaid tolls.
As it turned out, according to the Delaware Division of Motor Vehicles, vehicles with Maine-registered trailers in tow accounted for a fifth of unpaid tolls in 2012 — $300,000 out of $1.5 million. Delaware residents could save $18 per 2,000- to 5,000-pound trailer if they registered in Maine, where the registration costs $22 to Delaware’s $40. Again, it was legal under Maine law but a violation of Delaware statute. According to the Maine Bureau of Motor Vehicles, the owners of some 5,360 trailers registered in Maine have legal addresses in Delaware.
According to the secretary of state’s office, Maine takes in $100,000 annually in out-of-state vehicle registration fees; towns and cities take in another $350,000 in excise tax. In recent years, trailer registrations — both in-state and out-of-state — have brought in $6 million to $15 million.
Those sums, however, pale in comparison to the nearly $900 million in revenue Delaware collects as a result of the competitive advantage it holds over other states and is eager to exploit. That’s Delaware’s status as a corporate tax haven, where it’s cheap and easy for corporations to register holding corporations through which they can funnel revenues and avoid taxes in the state where they’re actually conducting business. Delaware law encourages this by not levying corporate tax on Delaware corporations’ income from business not conducted in Delaware.
The practice has deprived the states where those companies are actually conducting business $9.5 billion in tax revenue over the course of a decade, The New York Times reported in 2012.
Just as Maine’s competitive advantage attracts a few bad apples — tax and toll evaders — Delaware’s does, too. Investment schemers, foreign arms dealers and lobbyists implicated in corruption schemes have set up Delaware shell corporations.
Maine’s competitive advantage is much less lucrative — and much less damaging — than the competitive advantage claimed by one of the states complaining about Maine’s lax auto and trailer registration laws.
What does that say about Maine’s competitive advantage? It would be a much better bet for the state to foster a more substantial one. A world-class workforce, for example.
