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Is Eliminating the Car Tax a Good Idea?

Writing those checks to the tax assessor is pretty annoying, isn't it? But here's why Patch Back's Lisa Bigelow suspects eliminating this tax may not be such a great idea after all.

Who wants to get rid of the car tax?

If you’re like most Connecticut taxpayers, chances are you thought to yourself, I do! I do! But if you’re the leader of a municipality or a member of your town’s finance board, you probably broke out into a cold sweat.

Few would argue that the Connecticut state car tax is hugely regressive; it’s also unpopular and sending those checks every year is annoying, to be sure. But ask yourself: would you rather pay the car tax as it stands now or possibly face a steep increase in your property taxes?

During last week’s budget address, Governor Dannel Malloy pointed to the elimination of the car tax as a centerpiece of his fiscal plan, along with some other political gimmickry that has legislators and watchdogs shaking their heads in confusion.

The problem is this: municipalities depend on the estimated $560 million the car tax raises to fund local budgets. As proposed, Malloy’s budget does not include a way for municipalities to recoup this lost tax revenue. Since money doesn’t grow on trees (except maybe in Greenwich), municipalities will have to figure out a way to get this revenue back on the books. Probable result? Increased property taxes.

If passed as is, the new budget will exempt the first $20,000 of a car’s assessed value from the tax. Taxpayers in affluent communities may see their taxes go up twice, because those who own cars worth more than $20K will have to pay that tax, plus make up the revenue of those who don’t. And their property taxes may go up anyway.

Republicans now face an odd choice: criticize Malloy for “cutting” taxes or support the cut and potentially wind up in deeper financial waters at home.

It’s unfortunate the governor, who campaigned two years ago on increasing transparency and eliminating one-time budget fixes, is now resorting to the same gimmickry he once criticized. And unfortunately, the shenanigans don’t end there.

Business leaders are complaining that tax hikes due to expire will now be extended under the proposed budget (is a retained tax hike the same thing as raising taxes? The Gov says no). Plus, in a picture perfect example of the sort of unintended irony only government can accomplish, the new budget, presented in a new “streamlined” fashion, caused enormous confusion among legislators who can’t find where line items are located.

But wait! There’s more! In still more budget trickery, Malloy cuts Medicaid coverage for poor parents and aid to hospitals, both of which will presumably benefit from the shift to Obamacare.

The winner? Insurance companies, who will furnish the coverage, while raising rates for everyone else.

Insurance companies will also benefit from the elimination of a state Healthcare Advocate unit funded by the insurance industry that recovers Medicaid funds paid in error. Budget Director Benjamin Barnes said the unit hasn’t been effective, but State Healthcare Advocate Victoria Veltri told the Connecticut Mirror the unit uncovered serious processing errors. It was also hampered by bad data.

But back to the car tax, which may wind up hurting us more than it helps. How will municipalities make up the revenue they so desperately need? With drastic cuts or higher taxes, or maybe even both.

Keep that in mind when it’s time to vote come November 2014. 

Donald Borsch Jr. February 12, 2013 at 02:28 PM
Why should it be an either/or situation? Why can't the leaders of our local governments figure out how do make the most of what we give them, just like I do with my household budget? This is not rocket science. It's simple math. Last I checked 1 + 1 = 2, and on that simple truth anyone can budget successfully.
Dave Abernethy February 12, 2013 at 02:29 PM
One wonders what good could possibly come of the change. There are many people paying less car tax now since they haven't been able to buy a new car in years. So whacking them with higher home taxes will help how? There are also renters who must pay the car tax now. Under this plan, their taxes will decrease and homeowner's taxes will soar. Rents will have to rise to pay those taxes. That will help how? Connecticut has a spending problem, which drives the tax problem. Switching the pockets that the state picks clean won't solve anything.
H. Ferguson February 12, 2013 at 05:58 PM
The only answer is for the state and local governments to lower spending. Otherwise it is only a shell game to see who ends up with the bill.
JAMIE HOWARD February 13, 2013 at 04:07 AM
when you got 60% of the work force working for the government directly or indirectly there lies your problum-taxes are a burden on capitalism an commerce-ps let the free market dictate- an we will have an abundance of money to run this great nation .we are heading for dire straits an i do not mean the rock band .THROUGH OUT THE LIBERALS
Nick Triantis February 13, 2013 at 05:58 AM
I support elimination of the car tax. It's actually the only thing our horrible Governor has ever proposed that I agree with.
Dr. Robin Appleby February 13, 2013 at 01:22 PM
France has 56 % of the citizens working for the government. It is a beautiful country but is COLLAPSING economically. They all want a cushy job working for the government with great medical and pension benefits. Somebody, somewhere in France needs to manufacture, grow or mine SOMETHING.... The whole Democrat-Socialist Welfare MOMMY state that takes care of you from birth to death is simply unaffordable. Here in America....we simply can't afford our government...Federal, state and Brookfield.
Ken February 13, 2013 at 02:33 PM
Why do you think local municipalities are against this proposal. When the article first came out in New Times about this plan I think I read that Danbury generates $10 Mill towards the local budget by the vehicle tax. While it may be a nice fantasy to think that cities and towns across the state can each raise their mill rates enough to recoup the $560 Mill solely through R.E. and business personal property taxes this is simply not reality. It is an also equally unrealistic idea that towns and cities can simply reduce spending to match the gap that would still remain between increased R.E. and business personal property taxes. The problem is that the impact of cutting the car tax would be immediate while the ability to manage this is not. While the theory is that towns pass an annual budget each year and spending must fall into line with that budget, the reality is that most towns have multi year agreements that lock in future costs. Yes, you can layoff SOME people to meet budget constraints but you can't realistically think about having to all of sudden lay off 20% without dramatically negative impacts on services.
Brookfield Resident February 13, 2013 at 04:13 PM
More ways the soak the productive part of society with effectively higher taxes. If we're serious, eliminate ALL car taxes, and then let us all (local and state) government figure out how to make due with the decreased revenue, just as every working citizen has had to figure out how to make due with less take home pay, higher gas and prices, etc.
Ken February 13, 2013 at 06:06 PM
There is something missing in this talk about cutting the car tax. Didn't the state just reduce the credit for property tax paid to $300 from $500? For those who are not home owners this means that they only had car tax they could apply as a credit. Isn't that the equivalent of $200 more on their state income tax. If you do away with the car tax, renters would have no credit available to them on the CT income tax return. Wouldn't this then be an additional $300 the state would net from this same group of taxpayers? Since cars are locally taxed if they were no longer taxed at the local level it is a given that local taxes on R.E. and business personal property would have to rise to make up this gap. Couldn't this then become a double whammy to renters in the state? First, the state receives their full tax since no credit would exist for these taxpayers. The second hit is that rents would rise to cover the higher taxes the landlord has to pay. It seems like the Gov. proposal of cutting the car tax could end up hurting lower income people.
Jeff Albarn February 13, 2013 at 06:39 PM
A lot of information and slanted generalities on here, a lot of passion, but what is the answer? How can we reign in excessive government expenditure at the local level as to not affect vital support systems in the control of the town? Where can we trim on the town budget? Why do we have multiple assistant administrators in the school system making well into six figures, and dozens of underpaid teachers? Why do we not have enough to make some real changes to the security in our schools, or even post a resource police officer at each building? Why are the police in our town paid less than our town leaders? The Patch is a great soap box, but when can we see real movement in tackling the town specific issues we all have? Why did we spend 250k in state grants to rebuild Kids Kingdom, but NOTHING on the bathrooms 5 feet from the playground? Stream of consciousness post here...I enjoy reading all of your comments. Thanks.
Steven DeVaux February 13, 2013 at 11:29 PM
Eliminate all non-income taxes. Income taxes should be the only one's left, even for towns. Seniors could afford to stay in their homes in town then instead of being driven by that former chairman of the Board of Finance who told them "If you can't afford the taxes you should move out of town:". If you don't make a buck, you don't pay a buck. Now that's fair, isn't it?
Steven DeVaux February 13, 2013 at 11:30 PM
The liberals are the new socialist fascist party in Amerika.
New Englander February 14, 2013 at 12:42 AM
If they eliminate the car tax, they'll just tack that money on to another tax somewhere else. The best way to get out of not paying much don't have a high value brand new car and you won't pay that much car tax.
Brookfield Resident February 14, 2013 at 02:27 AM
So you want to tax productivity? The only taxes we should have are consumption taxes. Income taxes (as well as capital gains) are a horrible form of taxation, as it creates a disincentive to be productive.
Ken February 14, 2013 at 04:18 AM
How would eliminating other non income taxes help seniors or anyone else stay in their homes? If you eliminate non income taxes the starting base for the CT. income tax will be reduced and rates increased to drive the same required revenue off of the income tax instead of across a wide range of revenue sources. Do you think you will miraculously find enough tax income through income tax hikes alone or that costs will simply disappear if the revenue base is limited to income? The CT income tax is based on Fed AGI. Currently, the first $12.5k for singles and $25k for MFJ in CT. has a $0 tax. If the taxable base were reduced to $2.5k for single or $5k for MFJ anyone including seniors with AGI over these amounts could have an income tax liability. Everyone makes a taxable buck unless their primary source of income is Soc. Sec. so this simply means the buck you earned that was previously non taxable will NOW be taxable.
Steven DeVaux February 14, 2013 at 10:39 AM
Property taxes are completely unrelated to a person's ability to pay. Completely.
Brookfield Resident February 14, 2013 at 12:14 PM
"From each according to his ability, to each according to his need" - Karl Marx
long time resident February 14, 2013 at 05:08 PM
Dr. Appleby I have yet to hear your ideas on saving taxes in Brookfield as you stated in your campaign. How are we in Brookfield going to start paying less rather than more?
Dr. Robin Appleby February 14, 2013 at 05:30 PM
Long time resident....come to the Board of Selectmen/Education/Finance tonight and hear some good ideas. 6:00 pm at BHS
Steven DeVaux February 14, 2013 at 06:05 PM
"Rob from the rich and give to the poor." - Robin Hood. "Play fair and don't spend more than you have" - Robin Appleby
BobCat February 14, 2013 at 06:14 PM
To Budget Director Barnes regarding the potential elimination of the Healthcare Advocate - I was locked in a dispute with my insurance company over a surgery they did now want to pay for, even though my doctor thought it was necessary. After trying to appeal it myself (good luck with that), I contacted that Office of the Healthcare Advocate and dealt with Vicki Veltri directly. Guess what - they blinked in I had the surgery. They pay a vital role in keeping the insurers honest. Without them, I would not have had anywhere else to turn other then expensive litigation.
Susan Balla February 16, 2013 at 10:16 PM
I thought the car tax also went to fix roads. It seems that no matter what you own they will find a tax for that item. We left England because of unfair tax. Where can we go now?
Steven DeVaux February 20, 2013 at 02:21 AM
Not properly invested Ken. Not by a long shot.
Steven DeVaux February 20, 2013 at 02:22 AM
...like you said New Englander, they'll just tack the loss of revenue onto an increase in another tax.
Steven DeVaux February 20, 2013 at 02:24 AM
Saudi Arabia or Alaska.
Charlie Suedo February 27, 2013 at 12:15 PM
Lowering or eliminating the car tax will only result in increased property taxes, lowering the value of home prices. Hartford isn't cutting spending, only reallocating where the money comes from. There is no such thing as a free lunch.
Steven DeVaux February 28, 2013 at 02:06 AM
They should eliminate the 3% home "sales" tax too. The towns have too much money. They need to lower it a little and stimulate the local economy.
Brookfield Resident February 28, 2013 at 03:29 AM
I think it's only 1% (.75% state, .25% town), isn't it?

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