Instead of eliminating the statewide property tax on 90 percent of motor vehicles like Gov. Dannel P. Malloy proposed in February, a bipartisan commission created by House Speaker Brendan Sharkey is looking at setting a statewide mill rate for property taxes on vehicles.
The proposal announced Tuesday at a Capitol press conference would cap the rate at 80 mills for all municipalities and lower it to 72 mills in the following year, and then 10 mills every consecutive year until it’s eliminated. The phase-out would begin next July.
“The idea of this as the governor has pointed out . . . it is inherently unfair that the same car in Hartford is taxed four or five times as much as that same car would be taxed in a low mill rate town,” Sharkey said. “There’s no reason why someone in Hartford should be paying more in property taxes for that same vehicle.”
He said establishing a statewide mill rate on motor vehicles will begin to create a system of taxation that’s more fair and then ultimately phasing it out completely by 2020.
But eliminating the tax completely means municipalities would lose about $632 million in revenue, which is one of the reasons the state’s two municipal lobbies opposed Malloy’s budget proposal.
Sharkey said establishing the state rate would give state lawmakers time to begin creating a fund to help municipalities make up the loss in revenue. Malloy’s earlier proposal simply eliminated the tax on motor vehicles valued at more than $28,500 and didn’t replace the lost municipal revenue.
“We don’t want to shock towns with the lost revenue,” Sharkey said.
So as part of the proposal to set a statewide property tax rate for motor vehicles, lawmakers would increase a surcharge on rental vehicles from 3 percent to 6 percent and increase registration fees for antique cars. The proposal also would increase from 20 to 30 years the age of vehicles that may be designated as antique, rare, or of special-interest. The changes to antique vehicles would take effect in 2015.
Rep. Jeffrey Berger, D-Waterbury, said the “mill rate is so broken we needed to basically quote-unquote blow it up.”
He said Connecticut is the only state that taxes motor vehicles based on mill rates levied at various amounts in every municipality. He said no other state taxes vehicles the way Connecticut does.
The equalized mill rate in Connecticut at the moment is about 28.9 mills. Hartford’s mill rate is one of the highest at 74 mills, which means they wouldn’t begin to lose revenue under the proposal until the second year.
Jim Finley, executive director and CEO of the Connecticut Conference of Municipalities, said that he doesn’t believe the legislature should move forward with this proposal before it does a tax incidence analysis.
“Right now they’re flying data blind,” Finley said in a phone interview. “Before it changes the motor vehicle tax system it should do a tax incidence analysis to determine the impact of the tax.”
The tax incidence analysis, which was also recommended by the commission, would weigh the impact of various taxes on individuals, families, and businesses. It would also analyze the impact on the state and local revenue system similar to a bill proposed by state Comptroller Kevin Lembo.
While it didn’t agree the state should move forward so quickly in eliminating motor vehicle taxes, Finley said it agreed with at least six of the other recommendations the commission put forward Tuesday.
Sharkey’s Municipal Opportunities and Regional Efficiencies Commission also proposed creating a common school calendar to help regionalize school transportation. It also creates five Master Planning Organizations and studies the creation of a statewide health insurance pool for school districts or bus companies to enroll drivers.
Another proposal would eliminate the mandate on public notices in newspapers and study adjusting Connecticut’s prevailing wage thresholds.
Rep. Tim Larson, D-East Hartford, quipped that “‘study’ is not a four letter word.” He said lawmakers will work hard to implement the proposals they’re unable to get done this year in the following legislative session.
The proposals are rolled into four separate bills:
—HB 5102 An Act Providing an Exemption from Property Tax for Motor Vehicles
—HB 6629 An Act Concerning Regionalism in Connecticut
—HB 5267 An Act Concerning the Regional Delivery of Human Services