Rell Modifies Car-Tax Proposal

New Plan Restores Credit To Senior Citizens, But Democrats Say It's Still A Shell Game

March 29, 2006
By CHRISTOPHER KEATING, Courant Staff Writer

Recognizing Democratic opposition to her car-tax elimination proposal, Gov. M. Jodi Rell offered a compromise plan Tuesday that would allow senior citizens to keep their $400 property tax credit and pay no taxes on their cars.

Rell's new plan, offered in the days before two legislative committees will begin voting on her budget and tax proposals, extends an olive branch in an election year to one of the most politically potent voting blocs: senior citizens.

Some seniors have criticized Rell's original plan, which also would have eliminated the property tax credit on the state income tax. They argued they could be losers under such a plan, particularly if they no longer drive, because they would lose the credit that offsets their taxes on a house or condominium.

"Some senior citizens have let me know that they believe the earlier plan would put them at a disadvantage because many no longer drive or have older cars and limited incomes," Rell said. "Frankly, their argument is a valid one."

Rell's compromise would keep the property tax credit for those 65 and older, regardless of whether they are single filers, heads of households or joint filers.

Some Democrats have harshly criticized Rell's plan, saying it is essentially a shell game because drivers would lose the credit at the same time that they would pay no car taxes. The credit is scheduled to be a maximum of $400 in the 2006 tax year, and the full credit goes to individuals earning up to $55,000 and couples earning up to $100,000 annually. Above those levels, the credit begins to phase out before being eliminated for singles earning more than $145,000 and couples earning more than $190,500. The maximum credit for the 2005 tax year was $350.

Rell's budget office estimates that her new plan would benefit 110,000 senior citizens and cost an additional $15 million, which would possibly be covered by the state's growing budget surplus, which has surpassed the expectations of budget watchers.

But Senate President Pro Tem Donald Williams, the highest-ranking senator, said Rell's changes are not good enough.

"The governor's movement on the issue shows the administration knows the plan is seriously flawed," Williams said. "When her plan means income-tax increases for the middle class, lost revenue to cities and towns, and the biggest beneficiaries of the plan are multimillionaires, it's a problem."

The Democratic-controlled finance committee is still formulating its response to Rell's car-tax plan, and no decisions are expected to be announced until next week. But the committee's co-chairman, Rep. Cameron Staples, said Tuesday that Rell is moving in the Democrats' direction.

"I think it's encouraging that she's recognizing the value of the property tax credit," said Staples, a New Haven Democrat. "She's acknowledging what we've been saying all along. It's a step along the way toward some final resolution."

Although he declined to flatly rule out Rell's plan or reveal the Democratic alternative, Staples said he is interested in potentially increasing the credit beyond $400 annually.

"My sense is it's better to stick with the property tax credit rather than any form of car tax relief," Staples said.

Another problem in Rell's plan, Staples said, is that she does not provide any limits on the number of cars or the value of the cars. As a result, millionaires in Greenwich would receive a windfall - by paying no local car tax and because they earn too much to qualify for the current property tax credit. Both Williams and Staples cited the example of famed clothing designer Tommy Hilfiger, a longtime Greenwich resident, who owns more than a dozen vehicles, according to the Greenwich assessor's office.

Rell's plan is "mostly beneficial to the Tommy Hilfigers of the world with several expensive cars," Staples said. "It's unlimited relief to the Tommy Hilfigers of the world."

Public records show that Hilfiger owns a stable of cars that include a 2003 Ferrari Enzo Coupe, a 2004 Bentley Continental, a 2004 Mercedes-Benz and a 2003 Cadillac Escalade, among others. The very rare Ferrari is valued at more than $1 million.

But Rell's budget director, Robert Genuario, said the case of Hilfiger and other millionaires would not make him favor legislating limits on the number of cars or the overall value that would be exempt from the car tax. Instead, the entire system should be eliminated, including the tax on cars owned by the wealthiest individuals, he said.

"The Tommy Hilfiger concept is the tail wagging the dog," Genuario said. "I don't think we should craft our public policy looking at one particular individual. The Tommy Hilfiger example is an anomaly. ... Those are so few in number that I really think it represents a diversion of the real issue."

Despite any disagreements, Genuario said the Rell administration intends to reach an overall budget agreement by the time the legislative session adjourns on May 3.