Capitol Connection - Car Tax May Go: Will it be lifting a burden?

Would you be happy if the car tax went away?  Most people would say yes.  The property tax we pay on our vehicles is expensive and depending on where you live in Connecticut the tax can be extremely high.  The good news is there are plans to end the car property tax.

According to the Tax Foundation, a non-partisan tax research group based in Washington, D.C, Connecticut and Virginia are the only states that have separate specific car taxes that apply to all cars, not just business vehicles.  You may not know but Connecticut’s car tax is the only one in the nation that taxes vehicles based on the town’s mill rate.  It’s important to distinguish this tax, which is a property tax on actual cars, from a sales tax that affects the purchase of vehicles. Car taxes fall into the category of tangible personal property taxes, which are levies on property that can be touched and moved.

Connecticut’s method of taxation means that same vehicle make, model and year will be taxed at a different rate depending on where you live. Usually residents living in the city pay hundreds of dollars more in car tax than do people living in the suburbs. This is truly a regressive idea that is unfair to all residents.

A bill to set the car tax rate at 80 mills, which is $80 per $1,000 of value, gradually ending it by the year 2021 - passed the State House of Representatives last year but never came up for vote in the State Senate.  There was however, a special account created called the municipal revenue reimbursement account (MRRA.)  The MRRA is an account set up to help towns recoup the money they will eventually lose when the car tax is eliminated.

The account was given a $4.9 million deposit called “seed funding” in the current two year budget.  A group of lawmakers from both sides of the aisle were placed on the MORE commission (Municipal Opportunities & Regional Efficiencies), a bipartisan panel charged with finding ways for cities and towns to regionalize efforts in order to save time and money including getting rid of the car tax.

This commission has set up a smaller group to work on a feasible way to phase out the car tax.  Thus far this group has recommended setting a statewide car tax mill rate limit.  Towns would not be allowed to exceed the rate.  The rate would also no longer be tied to a town’s local mill rate.  Some say this levels the playing field.

It is important however, to point out that the car tax is a major source of revenue for towns and cities around Connecticut. Many local leaders count on the money generated from the car property tax when they consider crafting local budgets.  Can we phase out the tax altogether?  How can communities pay for local services without it?

These questions will surely be brought up for consideration this year as we head into the 2014 legislative session. A slow adjustment period where towns can gradually absorb any loss will benefit all.

In the larger arena however, we must keep our eyes on the big picture.  Connecticut is a very expensive state to live in because of our tax burdens. Connecticut's 2010 tax burden of 12.27% ranks 3rd highest out of 50 states, and is above the national average of 9.9% (Source: Tax Foundation.)

Connecticut's taxpayers pay $6984 per capita in state and local taxes.  We must find a way to lessen the burden on our residents if we are to attract business and families for the future.

Sen. Witkos represents the 8th District towns of Harwinton, Avon, Simsbury, Canton, Granby, Barkhamsted, Hartland, Colebrook, Norfolk, Torrington and New Hartford.