Norwich - The Southeastern Connecticut Council of Governments responded Wednesday to Gov. Dannel P. Malloy's proposed car tax exemption in a letter stating the proposal would have a "significant" impact on towns and cities.

In his two-year budget, the governor proposed eliminating the car tax on vehicles valued at less than $28,500.

Earlier this month, Malloy sent a letter to municipal leaders asking them to partner with him on the budget changes and stating that "tangible relief to our middle class" was a budget priority.

Malloy said, among other points, that elimination of the car tax would help eliminate work for towns in assessment and collections. He also said the vehicle tax, with its associated collection costs and payment delinquencies, represents a "small portion of the tax base in most communities."

In its Feb. 20 letter to Malloy, the regional planning agency supported the governor's call for tax reform but argued against the proposed vehicle tax exemption as a solution. The letter stated that until a new taxation system is developed, municipalities depend on car and property taxes.

SCCOG's letter argues that, under the current proposal, municipalities would still have to evaluate all vehicles to determine which are exempt, requiring equal work but receiving "far less revenue for the effort."

In addition, SCCOG argued, the car tax exemption would hinder towns' abilities to offer incentives to attract volunteer firefighters. The letter stated many of the young firefighters don't yet own a house and therefore don't qualify for the incentive of property tax exemption, so the car exemption is the only financial incentive for them.

The letter said the elimination of the vehicle tax would significantly impact towns.

"If we lose our ability to collect motor vehicle taxes, we will have to either raise taxes, cut services, or a combination of both," SCCOG's letter to Malloy states. "Many of our towns simply will not accept any increase in taxes, which means there will be less teachers, police officers, firefighters, and other critical employees to deliver services."

The regional agency's letter said the municipal leaders want to work for local tax reform and asked the governor for ways to begin the dialogue. "We stand ready to work with you and other officials to craft meaningful change in the manner we tax at the local level and to ensure that any change be fair, equitable, and not simply shift the tax burden from one level of government to another."

The SCCOG chairman, East Lyme First Selectman Paul Formica, and the legislative committee chairman, Colchester First Selectman Gregg Schuster, signed the letter.

k.drelich@theday.com