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Hartford - House Speaker Brendan Sharkey and members of the Municipal Opportunities Regional Efficiencies Commission want to lower the vehicle property tax rate beginning next year.
"The local motor vehicle property tax is the most regressive tax on the books, so we would like to put in place a plan beginning next year that will start to ratchet down mill rates on cars," Sharkey, D-Hamden, said in an email.
After Gov. Dannel P. Malloy proposed phasing out the vehicle property tax starting July 1 of this year, municipal leaders protested, saying they would lose $633 million in annual revenue. In response, the Finance, Bonding and Revenue Committee pushed the vehicle property tax issue back to 2018 in a bill that passed out of committee last month.
However, the MORE Commission, which was re-established this year by Sharkey and is tasked with saving taxpayers money and creating municipal efficiencies, has continued working on the car tax and related municipal tax issues.
Starting July 1, 2014, no municipality would be able to raise its tax rate for motor vehicles above 80 mills, according to a proposal from the commission's Municipal Tax Authority working group. For the following fiscal year, starting July 1, 2015, no municipality would be able to raise the rate above 72 mills. As of now, motor vehicle property tax rates range from 10.2 mills in Salisbury to 74.29 mills in Hartford.
The tax rate would be reduced gradually until it declines to zero in 2023, according to the proposal. Towns that are already at the rate on the scale for a specific year would not have to modify until the following year. For example, Groton's tax rate, 20.22 mills, would not have to decrease until July 1, 2021, because the tax rate would not be pushed below 20.22 mills until then, according to the proposal.
To make up for the loss in revenue to municipalities, the proposal calls for the state to set up a Municipal Reimbursement and Revenue Account. Fees collected from the registration of antique, rare and special-interest motor vehicles would be deposited into this account.
Currently, the registration fee for antique or Early American vehicles is $80 every two years, according to the Department of Motor Vehicles website. In fiscal year 2012, $2.3 million was collected from registrations of Early American vehicles, said Ernie Bertothy, spokesman for the DMV. Another $63,638 was collected from a one-time $7 fee for purchasing the Early American license plate, he said.
Owners of such vehicles benefit because now, a vehicle registered as an antique can't be assessed at more than $500 for tax purposes, said working group chairman and state Rep. Jeffrey Berger, D-Waterbury. This would change as of Oct. 1, 2015, when antique vehicles could be assessed at values up to $2,500, according to the proposal.
The state currently has 51,094 registered Early American vehicles, Bertothy said. Under the proposal, the definition of an Early American vehicle - currently, one that is at least 20 years old - would change on Oct. 1, 2015, to reduce the number of vehicles eligible for this tax break. After that date, the vehicle would need to be at least 30 years old. This would reduce the number of qualifying vehicles to about 40,000, Berger said.
Once the overall motor vehicle property tax rate reaches zero, Berger said, the plan would be to eliminate the supplement to municipalities from the antique car registration fee or to come up with a new supplement.
"The governor created the discussion and the speaker was supportive of the idea, but wants to look at a way where revenue could be distributed back and slowly weaned off over time," Berger said.
Stonington tax collector Gisela Harma, who participated in the working group, said the leaders originally considered having the same tax rate across the state, but dropped that idea.
She said she is unsure whether elminating the vehicle tax would ever happen. She said she recognized that lowering the vehicle property tax means replacing the tax with something else.
We will have to "replace revenue with some other form of taxation," Harma said. But the commission wants time to look at how to do that, she said.