HARTFORD, CT — A bill that would eliminate car taxes but make up for the loss of local revenue by increasing the property tax assessments on homes and businesses was panned Monday by the two municipal lobbies.
The bill calls for phasing out property taxes on motor vehicles over a five year period, except on rental cars, and increases the property tax assessment rate from 70 percent to 100 percent to offset the municipal revenue loss. The bill was one of 15 that was up for a Finance, Revenue and Bonding Committee public hearing.
Bills, including some that would impose a flat, statewide tax rate for all cars regardless of which town they’re registered in, have been raised in the past. A law passed several years ago sought to use a half percent of the sales tax to offset losses in towns that ended up losing money from lowering their motor vehicle tax mill rate. The theme is the same — that it is unfair that the same car is taxed at different rates depending on the municipality where it is registered.
During the recent gubernatorial campaign, Gov. Ned Lamont floated the idea of a single statewide rate for motor vehicle taxes as a fairer, more equitable way for all taxpayers.
Municipal leaders say that’s a great idea in theory, but where are they going to make up for the lost revenue.
Harwinton First Selectman Michael Criss, testifying on behalf of the Connecticut Council of Small Towns (COST), said: “shifting more than $850 million onto the backs of homeowners will overwhelm property taxpayers and devastate housing values throughout the state.”
“Eliminating this tax and increasing the uniform assessment rate, will shift hundreds of thousands of dollars in additional property taxes onto homeowners and businesses,” Criss said.
Criss said municipal leaders from Connecticut’s smaller communities are very concerned that residents are at a tipping point. Homeowners in our communities are frustrated about rising property tax levels.
Changes in federal law that capped the amount of state and local taxes residents can deduct from their income taxes have shined a spotlight on Connecticut’s property tax burdens, Criss added.
“Unfortunately, SB-1139 will make things worse by increasing the cost of homeownership and diminishing housing values. Not only will this impose a greater burden on already overburdened homeowners, it will undermine Connecticut’s economy.”
Chiming in was Randy Collins, advocacy manager for the Connecticut Conference of Municipalities (CCM).
While Collins acknowledged that “the assessment of property taxes on vehicles can vary widely for the identical car based on location,” on the other hand, he said motor vehicle property taxes generate approximately $925 million annually for towns and cities.
“If we proceed to eliminate this tax, it must be done through a carefully thought out process that does not create a new class of winners and losers,” Collins said.
“Simply eliminating the tax on motor vehicles, even if done through a five-year phase out, and shifting that burden onto real property, will shift a significant burden onto businesses that do not own vehicles, urban homeowners that do not own cars and utilize public transportation, and to seniors,” Collins said.
Collins offered that CCM would be willing to work with legislators on the concept of eliminating the car tax, “but any plan that reduces $925 million in local revenue must provide for a means to replace it. To simply shift that revenue loss onto an already strained property tax base is problematic to say the least.”
Eliminating the property tax on motor vehicles will cost the Town of Litchfield more than $1.5 million dollars per year,” First Selectman Leo Paul said. “Without this revenue, our town will be left with a massive hole in its budget — a hole that will have to be plugged by increasing the mill rate on homeowners and businesses or cutting critical services.”
Eric Gjede, vice president of government affairs for the Connecticut Business and Industry Association, told the committee that the “business community is concerned that this legislation ultimately results in a shifting of the property tax burden from residential properties on to commercial properties.
“If enacted, it is conceivable that rather than lowering the mill rate to keep the tax flat for all taxpayers, municipalities may elect to keep the current mill rates in place and only provide relief via tax credit to residential property owners,” Gjede said.
Sen. John Fonfara, D-Hartford, and co-chair of the committee, said if the bill did move forward it would include language to ensure that tax burden wouldn’t be shifted from residential onto commercial property.