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Hartford - Gov. Dannel P. Malloy has called the local car tax Connecticut's "most hated tax" but his proposal to slash the levy is not being embraced by local government leaders or Republican and Democratic lawmakers, who fear it will lead to higher taxes on homeowners and businesses.
Malloy's proposal faced a strong outpouring of opposition at a legislative committee hearing Monday, and it appears questionable whether the Democratic governor's proposal will remain intact.
"I suspect that it will look a little bit different before we're through deliberating," predicted Rep. Patricia Widlitz, D-Guilford, co-chairman of the legislature's Finance Revenue and Bonding Committee, which heard from a parade of city and town officials who warned homeowners will see property taxes rise by hundreds of dollars a year if Malloy's proposal becomes law.
Malloy's bill would exempt the first $20,000 of a vehicle's assessed value from the local property tax. That means someone who owns a car with a market value of under $28,571 would pay no property taxes. The General Assembly's nonpartisan Office of Fiscal Analysis said that will result in a nearly $633 million revenue loss for cities and towns statewide.
Deep River First Selectman Richard Smith, president of the Council of Small Towns, told the tax-writing committee that he's been involved in local politics for 24 years and has never heard from a taxpayer demanding the elimination of the car tax. Rather, he said, they complain about property taxes on their homes.
Smith predicts Malloy's plan would lead to 2,000 homeowners in his town paying an additional $400 to $900 a year in property taxes to make up for the $900,000 in revenue Deep River will no longer receive from the tax on the town's 5,000 vehicles.
"I have yet to find one person who says this is a good idea," Smith said.
Malloy, a former mayor of Stamford, said he understands local officials are concerned. But he said it makes no sense that identical vehicles with the same market value can be taxed at vastly different levels based on where the vehicle is located, adding how no other state taxes cars the way that Connecticut does.
"It's the most middle class unfriendly tax we have. It's time to do something about it," he said.
"At least we're having a discussion, and I'm hopeful that we're going to do something about it and get it done."
Last week, House Speaker Brendan Sharkey, D-Hamden, announced the establishment of a bipartisan panel that will spend the next six weeks coming up with ideas for helping cities and towns reduce their costs and increase their efficiencies. Sharkey had chaired a previous version of the M.O.R.E. (Municipal Opportunities & Regional Efficiencies) commission in 2010.
Rep. Jeffrey Berger, D-Waterbury, said 18 states tax vehicles differently, such as relying on a statewide rate, and funnel the revenue back to the municipality or county where the vehicle is located. He said Sharkey's panel will look at all those plans and come up with its own model.
Berger said he believes the legislature and the governor have the will to address the car tax this year. The legislative session adjourns June 5.