Elected officials from small towns across Connecticut will travel to the state Capitol on Monday to tell the Finance, Revenue, and Bonding Committee that the elimination of the motor vehicle tax will be detrimental to their communities.
The Office of Fiscal Analysis recently calculated that cities and towns would lose $632.8 million under Gov. Dannel P. Malloy’s proposal, which eliminates the car tax for vehicles valued at less than $28,500.
Click here for a town-by-town breakdown.
Somers First Selectwoman Lisa Pellegrini plans to tell lawmakers that her town will lose $1.8 million, “leaving no other option but to raise property taxes on business and homeowners.”
The plan would exempt 11,481 vehicles in her small community near the Massachusetts border from the tax, but it would also require the town to collect taxes on 619 vehicles that fall outside the exemption.
Woodstock First Selectman Allan Walker Jr. plans to tell lawmakers that 87 percent of the vehicle taxes in his community would be exempt under the governor’s proposal.
“This action would necessitate approximately a 2 mill tax increase, which would be detrimental to the Town of Woodstock,” Walker said in his written testimony. “Motor vehicles represent 8.97 percent of Woodstock’s 2012 Grand List.”
The loss is equivalent to $1.1 million in local revenue and according to Walker “would shift the property tax burden to homeowners and businesses in our community.”
The motor vehicle tax exemption as proposed by Malloy is even more detrimental for the town of Stafford.
Stafford First Selectman Richard Shuck plans to tell lawmakers the car tax exemption means his community will lose $2.3 million in tax revenue, which is equal to about 10 percent of the town’s overall tax collections.
“Municipal leaders are on the front line of making tough decisions when it comes to cutting programs and positions,” Shuck said in his written testimony. “In the past few years Stafford has eliminated one resident trooper, a town administrator, and have not filled other vacant positions but have reassigned the duties to other employees.”
Local elected officials agree that eliminating of the motor vehicle tax, in combination with the other changes to municipal aid included in the governor’s budget, would result in higher property taxes and the elimination of other services or personnel.
The elected officials from small towns joined the chorus of big city mayors, who came to the Capitol last month to complain about the changes to municipal aid, including the elimination of the tax.
In New Haven, the loss of the motor vehicle tax is about $15 million, according to Mayor John DeStefano.
The result of the elimination will be to encourage people to own cars rather than use public transit, DeStefano said, citing an unintended consequence of the governor’s proposal.
On the other hand, it is a difficult tax to collect. DeStefano admitted that eliminating it would save some money, but he said that coupled with all the other changes to municipal funding, now is not the time.
“If we’re serious about this we ought to have a discussion about it,” said DeStefano, who also once panned former Gov. M. Jodi Rell’s proposal to eliminate the tax.
Unlike Malloy, Rell was going to compensate towns for the lost car tax by creating a new state grant. Some lawmakers have been talking about creating a statewide motor vehicle tax so that taxes on a Honda Civic in Hartford would be the same as taxes on Honda Civic in Guilford.
DeStefano has said that in a “perfect world” he would “support a uniform statewide mill rate.”
Office of Policy and Management Secretary Ben Barnes has said he felt that many local officials hadn’t thought the proposal through before criticizing it. He said they may be overestimating the impact car taxes have on their grand lists, given the poor collection rate of most automobile taxes and the high cost of collecting them.
He said he understood that the proposal would create challenges for municipal budgets, but he said state government has had to overcome some challenges recently as well.
Malloy has maintained that he offered it as “middle-class tax relief.”
But local elected officials don’t believe it will offer much relief at all.
Municipal leaders will argue that no such relief will be on its way because the burden will just shift to residential and commercial property tax owners.
And while the elimination of a tax should have the public jumping for joy, a conservative think-tank found that 52 percent of the public opposes the elimination of the motor vehicle tax if it means other taxes will increase. Thirty-four percent of the 500 surveyed in the poll supported the idea and 14 percent were not sure.