Governor's budget slashes local Conn. car taxes

Susan Haigh, Associated Press
Associated Press

HARTFORD, Conn. (AP) -- Municipal leaders voiced concerns Wednesday over Connecticut Gov. Dannel P. Malloy's plan to slash local property taxes on vehicles, questioning how they would make up some $560 million in lost revenue.

"We're straining to deliver basic services right now. And when you knock off $10 million, I don't know where I get it from," said Danbury Mayor Mark Boughton, referring to the amount of revenue his city now collects annually from property taxes on motor vehicles.

Malloy's two-year, $43.8 billion plan calls for exempting the first $20,000 of a vehicle's assessed value from the local property tax. That means for someone who owns a car with a market value of under $28,571 would pay no property taxes.

"This is tax relief for families who are middle class and working poor," Malloy said. "It gives a break to businesses — especially small businesses, and it takes an administrative burden off local governments."

While the lost funding is not made up elsewhere in the budget, Malloy's budget director, Benjamin Barnes, insisted cities and towns will be level-funded and should not suffer under the proposal.

"The proposal that we've made does not concern itself with how much property taxes are leveled by local governments and what they choose to spend their money on," Barnes said. "Those remain local decisions that every community across the state is going to make."

Barnes said the Malloy administration believes that taxing cars is the most unfair portion of the property tax system because owners of identical vehicles with the same market value can pay vastly different tax levels based on where the vehicle is located.

"We think by getting rid of this most regressive and most unfair portion, we improve the fairness overall of our tax system," he said. "It will cause some adjustment in the short run, but will not result in higher taxes unless local governments choose to spend more money."

But municipal leaders were skeptical. Torrington Mayor Ryan Bingham, president of the Connecticut Conference of Municipalities, said the proposal places a "potentially undue burden" on homeowners whose taxes would likely increase in order to cover the lost revenue from car taxes.

"If passed, that is a property tax increase, just in another form," he said.

Senate Minority Leader John McKinney, R-Norwalk, said after all the various changes the governor has proposed in municipal aid are taken into account, he believes some towns will receive less state aid. The municipalities' conference is currently reviewing the myriad proposals which shift funding between different state aid programs for cities and towns.

The car tax proposal, which affects all motor vehicles except rentals, would take effect July 1, 2014. Municipalities would have the option of implementing it earlier on July 1, 2013.

State lawmakers have been grappling with the local property tax on cars for many years. Former Republican Gov. M. Jodi Rell in 2006 proposed eliminating the tax entirely, but that proposal ultimately failed. It was criticized for giving a big tax break to wealthy people with expensive cars.

Senate Majority Leader Martin Looney, D-New Haven, said Malloy's plan is more progressive because it would only apply to the assessed value beyond the $20,000 mark. If lawmakers prefer an alternative, Looney said they might consider a statewide tax rate for cars, with the revenues funneled back to municipalities.