State budget problems have blocked recent efforts to repeal Connecticut’s car tax.
But even though a big deficit is forecast for next year, the Senate’s top leader says the state at least can act now to fix the car levy’s greatest flaw – a huge gap between urban and suburban tax rates.
State and local officials long have recognized that municipal property taxes are Connecticut’s most regressive tax. But while real estate values are dependent upon location, a car will function the same way regardless of the community in which it is stored.
“A house on the shoreline in Madison will inherently have greater value than the same physical structure maybe located in an inner city area somewhere,” Senate President Pro Tem Martin M. Looney, D-New Haven, said. “But a car is a car is a car.”
And property tax rates in Connecticut’s largest cities can, in some cases, be six and seven times those of its most affluent suburbs.
For example, the owner of a car valued at $20,000 would have paid $1,485.80 in taxes in Hartford in 2013, but only $207.80 in Greenwich.
“That’s why it really stands out as shockingly inequitable,” Looney said.
The New Haven lawmaker has introduced a bill to equalize motor vehicle taxes.
The measure still is being developed, but Looney said there are two basic approaches lawmakers could take.
The first involves replacing local property taxes on vehicles with a state property tax, which would reflect the average rate in Connecticut. Currently that would be about 28 mills, which represents a tax of $28 for every $1,000 of a vehicle’s assessed value.
The state then would send those funds to cities and towns. Taxpayers in communities with rates above average – roughly one-third of the state’s 169 cities and towns – would gain, while the rest would lose or break even.
But Looney said all distribution options are subject to negotiations and could be revised.
One concern with that first approach – besides the obvious tension between revenue winners and losers – is the fear that state government, when faced with a fiscal crisis, would keep some of the property tax revenues for itself.
The chief lobbying agency for cities and towns, the Connecticut Conference of Municipalities, has expressed support for equalizing car taxes. But it has been equally adamant that this be conditional upon assuring communities that all car tax receipts would be sent to municipalities.
Looney, who said he understands that concern, said an alternative approach would involve joint collections.
An average tax rate still would be set. Cities and towns would levy a portion of that tax. The state would levy the rest and redistribute it. Though not a perfect solution, Looney said local officials’ fears might be alleviated if some of the money still were collected directly by cities and towns.
But more importantly, he said, redistributing car taxes could be the first step toward a more in-depth reform of a property tax system that still places heavy burdens on Connecticut’s low- and middle-income households.
“I think there is a growing concern over this whole issue,” he said. “We need to make a breakthrough somewhere.”
Gov. Dannel P. Malloy proposed eliminating car taxes entirely two years ago. But that proposal, which did not include replacing the roughly $600 million in property tax receipts communities stood to lose, stalled.
Malloy spokesman Devon Puglia made it clear Friday that the car tax equalization debate is on the table.
“The Governor has said in the past that it unfairly affects some towns more than others,” Puglia said. “If something passes the legislature, we will carefully review it.”
House Speaker J. Brendan Sharkey, D-Hamden, who last week unveiled an array of proposals to cut local costs and bolster municipal budgets, said he believes Looney’s bill would be a strong complement to that effort.
The Senate leader was equally supportive of Sharkey’s proposals.
Though majority Democratic leadership in the House and Senate had bumped heads over a handful of issues in recent years, Looney – who succeeded Brooklyn Democrat Donald E. Williams as Senate president pro tem last month – said “I’m very encouraged by the level of cooperation” between the caucuses.
Looney’s district includes a portion of Hamden, and he noted that Sharkey is one of his constituents.
A former Senate majority leader, Looney said he also continues to have a strong working relationship with House Majority Leader Joe Aresimowicz, D-Berlin.
“I think there is a real opportunity,” Looney added. “I’m hopeful we can do something substantive on it this year.”