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    Sunday, April 21, 2024

    Conn. legislators trying to end unpopular car tax for good. Here’s how.

    For decades, legislators have struggled to eliminate Connecticut’s unpopular car tax, and they battled over the idea again.

    During a public hearing, lawmakers debated over the best way of eliminating the tax, which has proven to be far more difficult than it appears.

    The biggest stumbling block is replacing nearly $1 billion per year that the municipalities currently collect and mayors and first selectmen rely on that money to balance their budgets every year.

    The latest plan calls for phasing out the car tax over five years, but that would be done by gradually increasing the rate on real estate.

    “My fear is property taxes on homes are going to go up,” said Rep. David Yaccarino, a North Haven Republican on the tax-writing finance committee. “I don’t think we’re going to get there this way. We’re helping in one way, but hurting in another. There’s unintended consequences with this legislation.”

    But Senate President Pro Tem Martin Looney, one of the two most powerful leaders in the legislature, said eliminating the tax is an issue of fairness.

    “Motor vehicle property tax is a regressive nuisance tax that frustrates our constituents when they get a surprise bill in July or even worse … January,” Looney said. “Less than half of all states collect such a tax, and we have seen recently that states like Rhode Island and Georgia have moved to eliminate it. Similar to us, there are still other states trying to figure out a solution that works for them to eliminate this unpopular tax.”

    The driving force behind the recent effort has been Sen. MD Rahman, a freshman Democrat from Manchester who proposed the measure to help senior citizens, young students, and businesses. He told the story Monday of immigrating to the United States 25 years ago from Bangladesh with only $200 and a backpack. While earning $7.50 per hour at the time, Rahman said it was difficult to pay the car tax.

    “It is a regressive, complicated, unfair tax,” Rahman told fellow lawmakers.

    Even though some colleagues told him of the difficulties of tackling a huge problem, he says he wants to do something about it.

    New York, Rhode Island and Pennsylvania do not collect car taxes, and Connecticut can join them, he said.

    Major opposition

    A major problem for the bill is that two highly influential lobbying groups at the Capitol, the Council of Small Towns and the Connecticut Conference of Municipalities, are opposed to the plan because they are concerned about reimbursements to the towns. Legislators listen closely to any issues that would adversely impact their towns, and they are cautious about making sweeping changes.

    “The elimination of the car tax is a goal that we all support but should be part of a comprehensive reform of the property tax system combined with needed municipal revenue diversification that will reduce the overreliance on the property tax,” said Randy Collins of CCM. “Any plan that eliminates more than $1 billion in local revenue should provide for a sustainable means to replace that revenue. Simply eliminating the tax on motor vehicles, without a comprehensive plan to provide revenue replacement will simply result in shifting that burden onto real property and the burden on businesses that do not own vehicles, homeowners and renters that do not own cars and utilize public transportation and to seniors on fixed incomes.”

    In the same way, the influential Council of Small Towns, which represents communities with fewer than 35,000 residents, is concerned about reimbursement if the state faces tough fiscal times in the future.

    “Although Senate Bill 450 will eliminate what many consider a nuisance tax, it will shift a tremendous burden onto the backs of homeowners, many of whom are struggling to address costs associating with rising inflation and other factors,” COST executive director Betsy Gara said Monday in written testimony. “Currently, the car tax is capped at 32.46 mills, impacting 75 municipalities and 25 districts.”

    History

    Ending the car tax has been a political football for more than 30 years. Multiple governors have offered plans on how to cut the taxes while making sure towns are fully reimbursed. Each time, however, opposition by legislators and local officials has torpedoed the plan.

    That trend continued this year in February when a special, 22-member taskforce ended its final meeting without agreeing on how to eliminate the tax despite holding seven meetings as they studied the issue.

    In the early 1990s, then-Gov. Lowell P. Weicker Jr. called for phasing out personal property taxes over 10 years. After Weicker’s plan failed, then-state Sen. James Maloney of Danbury successfully pushed a proposal to eliminate the tax in future years. But before that plan took effect, Weicker’s successor, Republican John G. Rowland, persuaded the legislature to repeal the law after deriding the plan as “Maloney baloney.”

    Republican Gov. M. Jodi Rell then proposed a complete elimination in 2006 and 2007, while Democratic Gov. Dannel P. Malloy proposed a partial elimination in 2013 that would have applied only to cars with a market value of less than $28,500. As a result, high-end cars like Rolls-Royces, Bentleys and Ferraris would still have been taxed. But neither plan was adopted.

    When Malloy proposed his idea, then-state budget director Ben Barnes said he was paying $400 per year on his Volkswagen Jetta in Stratford, but the same car would cost $1,400 in car taxes in Hartford.

    Statewide, the amounts collected in car taxes vary widely from town to town.

    A small town with fewer than 13,000 residents, Windsor Locks collected $7.18 million in car taxes in the 2024 fiscal year due to numerous car rental companies surrounding Bradley International Airport. That compares to $4.97 million collected in East Hampton, which has a similar-sized population.

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