Though 2014 is a state election year, don’t count on any votes at the Capitol to repeal Connecticut’s controversial tax on motor vehicles.
After watching last year’s repeal bid arise unexpectedly — then quickly run out of gas — advocates are ready to take the slow-but-steady route the second time around.
And for a state tax study panel, that means: learning how other states got rid of the car tax; finding ways to help cities and towns save money; and convincing state lawmakers that what some perceive as near-impossible actually can be done.
“We’ve got to get people to a comfort zone with this idea, which I don’t think happened last year,” said Rep. Jeffrey Berger, D-Waterbury, adding that this is far more important than having a repeal vote in the 2014 legislative session. “It could be several years” to eliminate the tax.
Gov. Dannel P. Malloy surprised many of his fellow Democrats in the legislature’s majority last February when he proposed ending communities’ ability to tax motor vehicles starting in the 2014-15 fiscal year.
But it wasn’t repeal that surprised Democrats, most of whom have long argued to ease property tax burdens. It was that Malloy’s plan did not replace the $600 million-plus that municipalities collect from the tax — a huge amount equal to roughly one-fifth of all state aid to communities through major formula grants.
Within two months the legislature’s Finance Committee had recommended delaying the proposal to 2018.
And when the House of Representatives voted on a bill on the session’s second-to-the-last day, it involved a gradual phase-out of the tax between 2018 and 2021 in nearly all communities.
The Senate never voted on the bill.
“I’d never vote for it” unless convinced that his community would be made whole, Rep. Daniel Rovero, D-Putnam, said after Thursday’s study panel meeting. “Until we deal with that I don’t think there’s a chance of it passing. Most legislators will say ‘I can’t penalize my town like that.’”
Rep. Henry Genga, D-East Hartford, recalled when he first discussed the 2013 car tax repeal proposal with East Hartford town officials.
“When this was originally brought out by the governor, they shuddered,” he said. “We have to be able to show municipalities what we’re doing to them is really fair.”
While the potential loss of $600 million in car tax revenues is huge to cities and towns, the state has many options to help them deal with it, Berger said.
One is to investigate new ways for communities to raise money.
Connecticut largely limits municipalities to the property tax. But in other states taxes on hotel services, general sales and even income are allowed. The panel will conduct an informational meeting Nov. 7 to hear from officials in other states.
It’s particularly important for lawmakers to search for ways to help communities — and the state — cut government costs and apply those savings toward the goal of car tax repeal, said Joseph Brennan, senior vice president of the Connecticut Business & Industry Association.
“Anything that adds to the overall tax burden is a concern,” said Brennan, who also serves on the study panel. “We’re not in that kind of economic environment right now. We still have to be extremely sensitive.”
Jim Finley, executive director of the Connecticut Conference of Municipalities, agreed that simply allowing communities to tax new items other than vehicles isn’t guaranteed to help.
“Before you do anything, you need to do a full tax incidence analysis,” he said. “You need to know who is affected by a new tax, and what the effect is.”
But Finley also said the solution to eliminating the tax can’t simply be to tell cities and towns to cut their budgets by a matching amount. Local governments have a much better track record at fiscal efficiency than the state does, he said, adding that state government likely will have to increase town aid to make any car tax repeal successful.