“A car is a car is a car,” Gov. Dannel P. Malloy said Monday in defense of his proposal to eliminate 90 percent of municipal motor vehicle taxes.
Malloy proposed eliminating the tax on motor vehicles valued at $28,500 and under as part of his two-year budget proposal.
But big city mayors and small town first selectmen say the loss of $632.8 million in revenue will be devastating and will force them to shift the tax burden onto homeowners and businesses.
At a Capitol press conference Monday, Coventry Town Manager John Elsesser said his town is one of the top 10 most rural in the state and motor vehicle taxes make up 9.2 percent of its Grand List.
“It’s estimated if the governor’s proposal goes forward we’d lose $2.2 million in property tax revenue,” Elsesser said. “The revenue loss would be equal to a 25 percent reduction in the local government budget . . . that equates to eliminating the entire police and public works department.”
He said the argument is that municipalities need to be more efficient with the resources they have, but Elsesser has been in town for 25 years and over that time Coventry has 7.5 percent fewer employees, 10 more miles of road, and 3,000 additional citizens.
“I think we’re doing pretty well in efficiency,” Elsesser said.
But Malloy, the former mayor of Stamford for 14 years, has little sympathy for a tax that’s as regressive as the motor vehicle tax.
“It is one of the most egregious taxes on the books in the state of Connecticut,” Malloy said Monday after an unrelated event. “You own a car in Greenwich you’re charged less than 11 mills. you own a car in Hartford you’re charged 75 mills. It makes no sense.”
The Finance, Revenue, and Bonding Committee was holding a public hearing Monday on Malloy’s proposal to eliminate motor vehicle taxes on vehicles valued at under $28,500.
“It’s the most hated tax. It’s the most unfair tax. It’s the most middle class unfriendly tax we have,” Malloy said. “It’s time to do something about it. At least we’re having a discussion and I’m hopeful we’re going to do something about it.”
“Is there some shifting? The answer is yes,” Malloy admitted. But he believes middle-class families will come out ahead. He also believes his way of doing it is the best way.
“I think my reform is the best one and essentially does away with the tax for 90 percent of homeowners,” Malloy said.
However, James Finley, executive director and CEO of the Connecticut Conference of Municipalities, said he’s open to discussing the creation of a statewide motor vehicle tax rate.
He said to take away the municipal motor vehicle tax revenue all at once is a “cliff proposal” that will force municipalities to come up in two years with a way to close a $633 million revenue hole.
He said the big cities and suburbs his organization represents are willing to work with House Speaker Brendan Sharkey in coming up with a uniform mill rate for motor vehicle taxes that can be phased in over time.
According to the Office of Legislative Research, at least 18 states impose statewide motor vehicle taxes or fees based on a vehicle’s value, but only Kansas and Mississippi refer to the tax as a property tax.
However, not all municipalities agree that a statewide motor vehicle tax rate would solve the problem.
The Council of Small Towns panned the idea of a statewide tax rate, as did Lyme First Selectman Ralph Eno.
Eno citied the Planning and Development Committee’s bill to create a statewide motor vehicle tax rate and said “the fix is property tax abuse at its worst as far as I’m concerned.”
Eno said the legislation would create an average mill rate for motor vehicles statewide. Local tax collectors would collect the average as part of their levies, but towns with lower mill rates would send the extra money to the state, which would then redistribute it to the towns that have higher than average mill rates.
He said the towns paying into the state fund will have no say regarding its distribution, so when the state runs out of money in the future it just becomes another pot of money to raid to balance the budget.
The next time the state “gets a case of the ‘I can’t balance my budget blues,’ guess what’s going to happen to that dedicated pot of money?” Eno said. “It will be swept just like all the others.”
Lawmakers are looking to find the middle ground and offer their own solutions.
Rep. Patricia Widlitz, co-chairwoman of the Finance Committee, said Monday that she suspects the governor’s tax package “will look a little bit different after we’re done deliberating.”