Democratic legislative leaders said there may not be any language in the budget guaranteeing that future legislatures will continue to use a half percent of the sales tax to fund property tax relief on motor vehicles, but they were optimistic that the funds would continue to be used for their intended purpose.
“Once it’s under way I think municipalities will come to count on this revenue stream,” Senate President Martin Looney said Wednesday.
That’s partly because property taxes are an issue municipalities have been dealing with for decades, and partly because of the benefit the policy offers to businesses like Hartford Distributors in Manchester.
The budget that passed June 3 will create a statewide motor vehicle tax rate of 32 mills and will use half a percent of the sales tax to offset any losses towns experience because of the new rate.
Ross Hollander, CEO of Hartford Distributors in Manchester, said that he expects to save thousands of dollars on motor vehicle taxes in the first year the new policy is in place, followed by even more in the second year.
With a local mill rate of 39.4 and 90 motor vehicles in his company fleet, Hollander is currently paying more than $30,182 in motor vehicle taxes to both Manchester and the local fire district. Dropping the statewide motor vehicle tax rate to 32 mills in 2016 will cut Hartford Distributors’ motor vehicle tax bill by about 19 percent, or $5,700. When the mill rate drops to 29.36 mills in 2017, it will cut their bill an additional $2,000 for a cumulative tax cut of $7,700.
The Budweiser beer distributor will use the savings to reinvest in a solar installation to reduce the refrigeration costs, Hollander said.
“This is certainly a commitment we intend to keep going forward,” Looney said of the use of the sales tax to lower municipal motor vehicle taxes. “The problem we hear all the time is that the property tax is a very inelastic instrument to raise revenue.”
About 37 percent of all car taxes are paid by businesses, so the new statewide rate will be a substantial property tax break for businesses, Looney said.
Asked whether a “lockbox” should be used to make sure the funds from the sales tax continue to be used to reduce motor vehicle taxes, Looney said the idea had merit.
“I would certainly think it’s as meritorious for consideration for a lockbox as other categories of spending,” Looney said.
Sen. Steve Cassano, D-Manchester, said he’s had conversations with local elected leaders about the issue and he understands there’s skepticism about whether the revenue is coming next year.
However, “in the last five years nobody has been treated better than the municipalities,” Cassano said. “They have been held whole. It’s the only organization, group — whatever it might be — that has been held whole in the last five years.”
Cassano said it’s a safe bet the revenue will be there for them in the future.
When the Democratic legislature and Gov. Dannel P. Malloy negotiated the budget, they agreed to use a half percent of the sales tax for property tax relief and a half percent to fund the governor’s transportation initiative.
On Tuesday, Malloy said he would talk to lawmakers about convening a special session to make sure the funding for transportation would be there in the future. He said he would prefer a constitutional amendment to make that happen, but Looney said he wasn’t certain about the idea.
“I support a lockbox for the funding that goes into the special transportation fund from the gasoline tax and the gross receipts tax,” Looney said. “I think it’s entirely appropriate to make that a constitutional matter.”
However, “in terms of the sales tax revenue that’s something that’s open for debate, but if we’re going to do it for transportation then I think we should also do it for the property tax piece,” Looney said.
