This story is part of CT Mirror Explains, an ongoing effort to distill our wide-ranging reporting into a "what you need to know" format and provide practical information to our readers.
Editor’s Note: This article is part of CT Mirror’s Spanish-language news coverage developed in partnership with Identidad Latina Multimedia.
For years, lawmakers have been working out the details on a plan to change the way Connecticut towns assess the value of motor vehicles for tax purposes.
A 2022 law requires that Connecticut towns use the manufacturer’s suggested retail price, or MSRP, rather than the National Automobile Dealers Association valuation system to figure out how much vehicles are worth. The law aims to make the way cars are valued more predictable and uniform as they get older.
But now that the change went into effect, some town officials said they’re bringing in less money and are increasing their mill rates to make up for the loss.
Lawmakers had adjusted the law during a special session over the summer and, in response to the towns’ concerns, changed it again with an emergency-certified bill at the start of this legislative session. Still, some lawmakers want to phase out the car tax altogether.
Here’s what you need to know about the changes.
How does this affect my taxes?
It’s likely that most people’s vehicles will be valued lower, which would bring down their taxes. The manufacturer’s suggested retail price also has a set 20-year schedule of depreciation, as opposed to the National Automobile Dealers Association, which fluctuates more.
That means car owners should be able to better predict what their future car tax bills will be, based on how old their vehicle is.
The new system of valuing cars is less susceptible to market swings. The change aims to prevent big shifts, such as the one many people saw during the pandemic when the price of vehicles — and the cost of the car tax — spiked.
What does this mean for my town?
Towns have reported that the change has meant big drops in their grand lists, or the total value of taxable property in town. The town gets a certain percentage of that value as tax revenue, which it uses to pay for town projects and programs such as the school budget, roads, water systems and libraries.
Some towns have increased their mill rates to make up for the difference, meaning that property taxes could increase in the coming year.
What has the legislature done?
State lawmakers have worked on this issue for years.
When the 2022 law mandated that towns use the manufacturer’s suggested retail price, or MSRP, the list began with an 80% valuation for vehicles that are up to a year old, meaning that it drops to 80% of its original value in that year.
But legislators said they needed to make “fixes” to the statute before it went into effect in October 2024. They met in June in a special session to make technical changes to the law, including starting the depreciation schedule with an 85% valuation for vehicles that are up to a year old, lessening the impact on municipal budgets.
But after the law went into effect in July, some towns complained that their budgets had taken too much of a loss. In February, lawmakers responded to the concerns by passing an emergency-certified bill that allowed towns to opt to set the depreciation schedule beginning at 90% of the original value, rather than 85%. Several towns have since decided to use the provision and change their schedules.
Most Democrats have been supportive of the changes, saying it will help towns better plan their budgets and lower car taxes for regular people. Some said it didn’t go far enough, and that Connecticut should get rid of its car tax altogether.
Several Republicans opposed the measure and said they worried that towns would lose too much money under the new system.
What is happening with the car tax now?
Connecticut politicians have been talking about what they say are problems with the car tax system for decades. Because each of the state’s 169 towns have different mill rates, residents pay different amounts for the same vehicles based on where they live.
Often, this has meant that people who live in cities, which tend to have higher mill rates, pay more in car taxes than people in wealthier suburbs. Lawmakers and governors have said they want to change that. Sen. MD Rahman, D-Manchester, has worked for the past couple of sessions on bills that would eliminate the car tax entirely.
He’s now working on a way to phase out the tax, although the details of that plan aren’t yet clear because lawmakers are still negotiating the language, with a goal of passing a plan this session.
