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Ditching Car Tax Looks Terrible For Towns

Gov. Malloy's proposed exemption would hurt municipal budgets

Hartford Courant Editorial

February 08, 2013

Of the many ideas in Gov. Dannel P. Malloy's budget message Wednesday, the one that has most underwhelmed mayors and first selectmen is the proposed property-tax exemption on motor vehicles.

Mr. Malloy proposed a tax exemption for the first $20,000 of assessed value of motor vehicles — meaning that, because vehicles are assessed at 70 percent of market value, taxpayers who own vehicles worth $28,571 or less won't have to pay any car tax.

At first blush it seems like good news, a tax break for middle- and lower-income folks. But is it?

Cities and towns collect about $560 million in taxes on vehicles, according to the Connecticut Conference of Municipalities. If the exemption is approved, most of that revenue will disappear, and state officials say they are not replacing it.

So, municipal leaders must either cut services or raise taxes on commercial and residential property. Officials in Hartford and New Haven say the car-tax exemption will cost them $18.7 million and $15.7 million, respectively. Small towns take a hit as well, and as North Stonington First Selectman Nick Mullane observed, this blow is particularly difficult now, after four years of belt-tightening.

Also, shifting the burden to real property is easier in a city such as Stamford, with a lot of commercial property and only 2 percent of its grand list from car taxes, than a town such as Sprague, where the exemption could blow a 20 percent hole in the budget, a town official said.

Mr. Malloy cited a report that described the car tax as "especially unfair" because it varies so much from town to town. Indeed, poorer residents of large cities typically pay higher car taxes than wealthier residents in lower-tax towns. This encourages people to register their cars in other towns or out of state.

This is all true, and good for Mr. Malloy for saying so. But wouldn't the better remedy be to mend it rather than end it, to create a standard statewide car tax and give the revenue to the towns? And if we really seek fairness for urban residents, how about a push for equalized car insurance rates across the state?