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Industry Rebounds, Luxury Tax Still Annoys (w/video)

by Hugh McQuaid | Nov 11, 2011 3:02pm
(8) Comments | Commenting has expired
Posted to: Business, Jobs, State Budget, Hartford, Convention Center

Hugh McQuaid Photo

As the economy rebounds, auto dealers are hoping the General Assembly will rethink a tax that went into effect in July, which increases the sales tax on cars priced at $50,000 or more.

At the Connecticut International Auto Show Friday, Jim Fleming, president of the Connecticut Automotive Retailers Association, said the state’s auto industry is healthier today than it has been since the beginning of the recession. But he said the 7 percent sales tax customers pay on luxury cars does not help the industry.

“We’re hopeful that as the economy is improving the legislature will make a decision that they don’t need that anymore because it certainly doesn’t help Connecticut car dealers be more competitive with out-of-state car dealers,” he said.

Fleming said that people generally purchase cars in the state where they live—unless they can find a better deal somewhere else. Which state people chose to buy their cars in has broad economic implications, he said.

“The importance of buying a car from a Connecticut dealer, certainly to the economy, is that consumers will generally service a car where they buy and the state of Connecticut gets the tax for that service work and it employs an awful lot technicians,” he said.

Gov. Dannel P. Malloy, who proposed the tax, said he did not think it had a negative impact on auto dealers. Fairfield County dealers are competing with dealers in New York, where taxes are substantially higher, he said.

“All we did was close the margin. I’ve heard no negative repercussions,” he said, after opening the car show.

Malloy said he was encouraged by the fact that the auto industry is recovering. Auto sales generate considerable revenue for the state and as they increase jobs are being created, he said. With over 12,000 employees, the industry represents one of the largest employee groups in the state, he said. 

Auto sales fell during the 2008 economic crash from an average of $9 billion a year to $6.3 billion. Sales are now back up to $8 billion. There are now 250 new car dealers in the state still less than the pre-recession levels, but Malloy said the industry is positioned to have a great year. He didn’t think the luxury tax would impede that.

“People are going to buy luxury cars if they want to buy a luxury car,” he said.

Jeff Aiosa, president Carriage House of New London, a Mercedes-Benz dealership, said his company has expanded as the industry has picked up. They recently relocated to a facility more than twice the size of its predecessor and added about 10 jobs, he said.

Aiosa said the blow of the luxury tax was lessened by Malloy’s decision to relax certain aspects of his initial proposal. For one thing, the 7 percent tax is not as steep as the 9.25 percent luxury tax the governor initially proposed.

“I think that a lot of the initial concern that we heard from customers who were following this was reduced by the law relaxing the initial 9.25 percent to 7 percent,” he said.

As it was originally written, the law eliminated the sales-tax exemption for trade-ins. So someone trading in an old car towards a new car over $50,000 would have to pay sales tax on the full amount rather what they actually paid. Aiosa said it helped that Malloy took that provision out of the law.

Even though the law was watered down somewhat, Fleming said he would prefer to see it off the books altogether.

“The danger of a stand-alone tax on automobiles is that in the future somebody could decide that perhaps they want to raise that rate and they want to lower the threshold. We worry about that because it would put Connecticut dealers and the jobs that they provide at a disadvantage,” he said.

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(8) Comments

posted by: Careful | November 12, 2011  3:29pm

Gov. Malloy is the role model for—“TAXATION ON, WITHOUT REPRESENTATION!”

posted by: gutbomb86 | November 13, 2011  1:35pm

gutbomb86

Without representation? No, that’s inaccurate. What I think you mean to do is to criticize the governor because you’re a partisan. But yeah he balanced the budget in the short-term by increasing taxes and making cuts and renegotiating contracts, etc., and it was a painful process for everyone but it was time to grow up and actually pay for the services that we all want and need.

posted by: ... | November 13, 2011  2:58pm

...

Any alteration to the current high end tax would probably not be repealed or removed until the second biennium budget the administration and legislature would need to put forward.

However, the car dealer lobbyists and perhaps independent economist would need to prove that they would get the same revenue from current taxes with the increase in sales than current sales where they are paying a bit more in the luxury tax.

posted by: Careful | November 13, 2011  5:03pm

gutbomb86:  Don’t praise the Governor for a yet unachieved success.  He also increased questionable spending that will probably come back to haunt a state that leads the country in per-capita indebtedness.  Malloy and our General Assembly’s spending agenda, will only mean more taxes to pay—in a state that is already taxed to the hilt, and continue to keep Connecticut business unable to compete with other states.

posted by: Careful | November 13, 2011  5:25pm

JonessAC12:  You may be going over-board—to suggest the current high end tax would be repealed or removed in the second biennium budget.

We elected a big-spender in Gov. Malloy and he continues to spend, with help from his partisan Connecticut General Assembly.

Don’t look for reducing or repealing taxes, Jonessey.  It won’t happen!

posted by: ... | November 14, 2011  9:33am

...

Careful: You really need to learn context in people’s posts and not read them as stand-alone objects. I was commenting on the opening line of this article “...auto dealers are hoping the General Assembly will rethink a tax that went into effect in July, which increases the sales tax on cars priced at $50,000 or more.”

The comment was based upon how it could get removed from the budget. We’ve seen previously proposed taxes in Malloy’s first budget get rescinded. And the special session reduced the payment period for the Business Entity Tax. So there is precedent of the administration and legislature pulling back a bit and regressing some taxes.

It was a simple analysis Careful of how the tax could possibly be removed under the new budget (and it is pretty much fact it can’t be removed), but as usual you fail to ‘look, before you leap’ into a discussion.

posted by: Careful | November 14, 2011  11:31am

JonessAC12:  If it is pretty much a fact that the tax won’t be removed—why did you pursue the subject?

posted by: ... | November 14, 2011  1:43pm

...

Careful: It is obvious to anyone who understands the way our legislative sessions go, this vocalization by Fleming is a clear indication they plan to lobby its removal in the second budget (like other lobbyists that might be representing industries affected by new taxes).

However, I don’t know why you ask me that question. You already have the answer in your mind to a question you present with ‘pretty much’ facts.