Members of a legislative working group tasked with vetting ideas for eliminating Connecticut’s car tax worried Wednesday about the “political whiplash” that may be caused by shifting the burden of the unpopular tax so soon after recent income tax cuts.
The group has been meeting since October in an effort to draft recommendations to get rid of the motor vehicle tax, which serves as a significant revenue source for Connecticut’s 169 municipalities.
The group has endeavored to recommend a path to scrapping the unpopular tax that would hold towns and cities harmless for the more than $1 billion in revenue that would be lost by its elimination.
But in order to make up those lost tax dollars, the state would need to identify new revenue sources and as the Feb. 9 start of this year’s legislative session draws near, members voiced concerns about raising other taxes.
During Wednesday’s meeting, Middletown Mayor Ben Florsheim worried about a suggestion to offset motor vehicle tax revenue by raising certain income tax brackets — particularly after Connecticut policymakers reduced the income taxes of middle income filers in a much-hailed tax cut that went into effect this month.
“It is sending a little bit of a mixed message to be revisiting the income tax so soon after we — for better or for worse — revisited that issue in the last legislative session,” Florsheim said. “It’s important to be part of the conversation but I think we need to be cognizant of the sort of political whiplash that that will create.”
The comment followed a presentation by task force member Tamim Ahmed, who broke down several scenarios for raising around $1.18 billion, either through increases in the real estate and property taxes collected by towns, increases in state-collected taxes like the sales tax and income tax, or some combination of options.
“All actors may have to bear some pain in getting this. That means the towns will have to do something and the state will have to do something,” Ahmed said.
The options all seem to come with their own pitfalls and many of them were articulated by members of the task force during Wednesday’s meeting.
“Any reduction in the motor vehicle tax is going to exacerbate the shift to real estate and to homeowners,” Matt Hart, executive director of the Capitol Region Council of Governments, said. “Already we have a situation across the state where residential assessments have increased significantly due to the housing market.”
Rep. Susan Johnson, D-Windham, said that any shift to local property taxes would hurt low-income homeowners in her district.
“That cost-shift to those people will cause them to have to sell, have to move into someplace else. We have a housing crisis now,” Johnson said. “Where are they going to move to? Where are the low income homeowners that have been in those homes their whole lives and want to stay there, where are they going to go?”
Meanwhile, the motor vehicle tax the group is seeking to eliminate is considered to be one of the more regressive taxes on the books.
That’s due in large part to its disparate impact. Motor vehicle taxes are determined by the mill rates of individual towns, which vary depending on each municipality’s taxable grand list. As a result, residents of cities, which often contain more non taxable properties like hospitals and universities, often pay significantly more in car taxes.
“All the legislators in the state of Connecticut know very well, it is unfair … and regressive,” Sen. MD Rahman, a Manchester Democrat who co-chairs the panel, said of the car tax. “It should be fair and progressive. This is why we’re all working together and created this task force … smoothly looking at every avenue, what we can do, how we can repeal this car tax.”
Department of Revenue Services Commissioner Mark Boughton suggested the task force take some additional time before making recommendations and study the tax policies of nearby states as well as the various unsuccessful proposals to repeal Connecticut’s car tax.
The task force should make sure their recommendations have a chance to be enacted by the legislature, Boughton said.
“Nobody wants to sit here and go to meeting after meeting and find out the legislature isn’t interested in taking it up or there’s no will with the governor to sign it,” he said. “I don’t think you’d get anything done this session anyways, to be very frank with you. I don’t think anybody has the appetite in a February to May session to want to do something like this.”
