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Municipal Loss Is State’s Gain

by Christine Stuart | Feb 18, 2013 6:29am
(10) Comments | Commenting has expired
Posted to: Town News, New Haven, State Budget, Taxes

Hugh McQuaid file photo

Gov. Dannel P. Malloy and Office of Policy and Management Secretary Ben Barnes

Gov. Dannel P. Malloy’s administration calls it an unintended consequence, but the loss of motor vehicle tax revenue for municipalities actually will bring in millions of dollars in revenue for the state.

That’s because under the proposed budget, the people who rent apartments rather than own a home will no longer receive a property tax credit to apply to their state tax liability. The governor’s proposed budget estimates the state will save around $21 million annually as a result of not having to pay out the property tax credit to apartment dwellers.

The elimination of the motor vehicle tax only applies to vehicles valued under $28,571 and will cost municipalities about $560 million a year in revenue.

Office of Policy and Management Secretary Ben Barnes said last week that the administration based the savings off figures from the Revenue Services Department, which told them around 180,000 people apply for property tax credits claiming only their cars. It then decreased the savings estimate from $35 million to $21 million.

“The amount of money we save is pretty inconsequential compared to the amount of money saved by taxpayers who pay car taxes,” Barnes said.

But New Haven Mayor John DeStefano, who could get behind changing the motor vehicle tax structure, said there are unintended consequences.

In New Haven, the loss of the motor vehicle tax is about $15 million. That means the burden of making it up will fall to both residential and commercial property tax owners. It could also encourage people to use cars rather than public transit, DeStefano said last week after a Capitol press conference.

On the other hand, it is a difficult tax to collect. DeStefano admitted that eliminating it would save some money, but coupled with all the other changes to municipal funding now is not the time.

“If we’re serious about this we ought to have a discussion about it,” said DeStefano, who also once panned former Gov. M. Jodi Rell’s proposal to eliminate the tax.

Unlike Malloy, Rell was going to compensate towns for the lost car tax by creating a new state grant.

“You know in retrospect, like Ted Kennedy with health care, it may have been a mistake,” DeStefano said. “I think there are reasons to eliminate the car tax.”

It’s not the first time DeStefano has conceded he may have been wrong on the car tax issue back in 2006.

But the other changes Malloy’s budget makes to municipal grants also need to be part of the discussion, DeStefano said.

“This whole budget makes the tax structure more regressive, shrinks the tax base of the job producing centers of the state, and makes their financial position more urgent,” DeStefano said.

Asked to set aside those other issues and to look just at the motor vehicle tax proposal, DeStefano said that in a “perfect world” he would “support a uniform statewide mill rate.”

Barnes said he felt that many local officials hadn’t thought the proposal through before criticizing it. He said they may be overestimating the impact car taxes have on their grand lists, given the poor collection rate of most automobile taxes and the high cost of collecting them.

He said he understood that the proposal would create challenges for municipal budgets, but said state government has had to overcome some challenges recently as well.

At a press conference last week , Malloy said he proposed the elimination of the tax to offer middle-class residents some relief.

“We had to hit upon a way to make sure that the middle-class got the relief that they needed and people who own very expensive cars continue to pay their fair share,” Malloy said. “We don’t move away from it overnight, but make sure we’re bringing to working families real relief.”

Municipal leaders argued last week that no such relief will be on its way because the burden will just shift to residential and commercial property tax owners.

A poll of 500 residents conducted by a conservative think-tank last week found that 52 percent of the public oppose the elimination of the motor vehicle tax if it means other taxes will increase. Thirty-four percent of those surveyed supported the idea and 14 percent were not sure.

Hugh McQuaid contributed to this report.

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(10) Comments

posted by: Reasonable | February 18, 2013  11:30am

Gov. Malloy continues with his trademark “careless with the truth ploys.”

posted by: AndersonScooper | February 18, 2013  3:33pm

So let me do the math:

1) if you’re a renter paying under $300 in car taxes, you get no savings.

2) if you’re a renter paying over $300 in car taxes, you’re liability on the first $28,000 of a car’s value is essentially capped at $300, which is the add’l state income tax you’ll have to pay. (I currently pay $600+ on a $20,000 car here in New Haven.)

3) If you’re a renter living in a suburb with a tax rate of about 20 mills, this whole thing is moot. (The current $300 property tax credit has been off-setting your car tax bill, up to a car value of about $25-$30,000.)

4) If you are a homeowner taking the property tax credit against your home, you’ll be saving significant money, but how much depends largely upon how much commercial real estate and how many renters there are in your town. (If your town is entirely homeowners, everyone’s home taxes simply go up by an equivalent amount.)

In any case I’m a fan of Malloy’s proposal, if only as a matter of equity. Why should a city homeowner be paying double or triple on his or her car taxes? (Not to mention insurance.) If anything we need incentives for people to live in Connecticut’s cities, not the disincentives currently in place.

posted by: bgenerous | February 18, 2013  4:16pm

Even with a uniform mill rate for motor vehicles, each town would experience some tax shifting between property classes (real estate, motor vehicles, and personal property).  Why wouldn’t personal property get a uniform mill rate if motor vehicles gets one?  Governor Rell did have the better motor vehicle property tax proposal although many would not like the elimination of the property tax credit on the state income tax that proposal required (it has gone down from a maximum of $500 to $300 since then).

posted by: David Streever | February 18, 2013  4:33pm

This is a pre-election year campaign move by the Malloy group.

I’m sure Barnes is a hard-working government servant who was given a narrow job—tell us how much money we can give people back by eliminating the car tax—and he did it. Of course he is a little defensive.

In principle, I agree with eliminating this tax. Cars should be taxed at the intensity of the usage, not the sheer fact of owning one. Like many assets, private car usage is aided by the Government, so there is no reason not to levy some tax on usage.

In the context, this proposal stinks, because it does not replace the ownership fee with a usage fee. As long as the government builds roads, bridges, and provides arbitration and medical services for car crashes, government should recoup some of that cost through a use tax.

Eliminating the asset tax but not implementing a use tax is short-term thinking. I suspect it is only being proposed because Malloy would like to make a lot of middle class citizens happy before the next election.

posted by: David Streever | February 18, 2013  4:37pm

Scooper: supporting private car ownership is not an incentive to live in a city. Which cities in the world do that? None. Every successful city—in the world—incentivizes mass transit, walking, and alternative transportation, which in turn increases density and makes the city more attractive by getting more entertainment and resources into a closer area.

As for insurance cost: city dwellers pay more because there are more accidents in the city. If you want to be incentivized to live in a city, don’t own a car here. You’ll find you save a ton of money and have an excellent life walking and biking around.

You can park your car in a garage on the outskirts and bike to it for drives. There are many ways to live in New Haven without a car. If you honestly want to see that supported and encouraged, don’t make it cheaper to own a car here: that is the exact reason why our streets are so poorly plowed even now.

posted by: Hoosier@CT | February 19, 2013  9:01am

How is it that Governor Malloy things by only taxing cars over $28K the people who continue to pay property taxes are “paying their fair share”? Aren’t they already paying taxes? How is paying a larger percentage of their income in taxes their fair share?  This is pushing the “class envy” mentality that is really punishing the wealthy for being successful, and ignoring the hard work and chances they take in getting there.  How many wealthy are rewarded when they lose it all in an economic gamble on a new business? How are the dollars parents and students spend in education rewarded…. by taxing them at a higher rate than the high-school drop-outs? This “class envy” agenda is really counter-productive to our country; we need to reward the small business owners who take a chance with their savings in starting new businesses.  We need to reward those parents and students who are spending an enormous amount of money on over-priced education by letting them keep as much (percentage wise) of their income as the people who did attend college. We need to allow investments in our country to be rewarded, not punished.

posted by: David Streever | February 19, 2013  12:10pm

The wealthy benefit more from government than the poor. Infrastructure delivers goods and services to their doors allowing them to live a life of luxury previously unimaginable.

If you don’t think you got it good, think again.

posted by: Reasonable | February 19, 2013  3:52pm

David Streever:  “Who gave you the crystal ball—used frequently by Pres, Obama and Gov. Malloy?”  They tell people that they never had it so good also—as they feel they were elected to tell people—what they want to hear—“even if they may have a hearing problem.”

posted by: AndersonScooper | February 19, 2013  4:12pm


I don’t want to suggest you and your “kill every car” buddies are out-of-control ideologues, but for most American families a car is a necessary evil. (Nothing against the one guy I know who pedals his kids around in a bikewagon.)

So given the fact that your average New Haven family still needs a car, wouldn’t it be nice if they weren’t getting reamed when it comes to car taxes and insurance?

Everyone has choices. To live in the city, to live in the suburbs. To stay in Connecticut, to leave Connecticut. If we want people to choose to live in Connecticut’s cities, we need equitable equations. (Particularly when it comes to cities that aren’t Stamford or New Haven.)

Fwiw, and I doubt I can persuade you to see beyond your fierce ideology to the actual world most people are forced to live in.

posted by: ALD | February 19, 2013  6:48pm

Personally I see this like kissing my sister.  Take my car taxes away, and my home taxes go up.  In the end I pay about the same.

Any renter who owns a car, and not a home, and who believes their rent will not go up as a result of this because their land lord will just take the hit and not pass it on to them I am sure still believes in the tooth fairy too. 

In my town my property taxes are paid twice a year with half my home due each time and all my car taxes due at once with my first home payment.  So if I now get to split that into 2 equal payments that is some small benefit I guess.

Plus it will at least make registering all those Benze’s in Fla less rewarding.