HARTFORD, Conn. (WTNH) – The governor wants to give drivers a break on their car tax bill, but how much will it cost, is the policy sustainable, and which towns benefit the most?
The property tax on motor vehicles generates about $1 billion each year for local cities and towns around the state.
Mayors and first selectmen use the money to pay for education, police, fire, trash picks up, and other services, but if you save money on your car tax bill, who pays for the lost revenue? The state.
Someone who lives in Woodbridge and owns a luxury car worth $70,000 will pay about $2,000 in car tax. That same car taxed in the town of South Windsor will pay far less because that town’s mill rate is lower.
“I think it’s an unfair tax. We’re trying to equalize it. Can’t do it all overnight,” Gov. Ned Lamont said.
Lamont is proposing to lower the existing property tax cap of 45 mills on automobiles to 29. This plan will cost the state $160.4 million a year to reimburse towns.
He says it will affect 1.7 million vehicles in 103 towns, including South Windsor where the average driver could save $200.
The plan also affects poor communities.
Nora Duncan, the executive director of AARP in our state, says seniors need relief. “This is a great step in helping build a predictable and better yet, the reduced tax burden for our older residents so that they can have the financial stability they need to age in place.”
Ken Girardin, the Director of Policy and Research for the Yankee Institute for public policy, says the plan is not sustainable. “Whenever we hit fiscal turbulence, the first knob that you turn is these sorts of tax gimmicks.” He crunched the numbers and says certain towns will get a bigger benefit than others.
For example, Southington residents would save about 27-cents, but Woodbridge residents would save $133.
The gap is created as a result of different property mill rates and how much each community spends to run its local government.
“The more responsible thing for the governor to do would be to just give these folks the flexibility and then see what happens. Let’s see which mayors are serious about bringing their car taxes down,” Girardin said.
Connecticut Council of Small Town says its members are concerned state reimbursements will go away when there’s a budget crisis.
Michael Maniscalco, the South Windsor Town Manager, says the town would stand to lose $3 million.
“If it’s not going to be there, the unfortunate side is that that would essentially equate to a tax increase because it would be a property tax increase as a result,” Maniscalco said.
“Look, we’ve had three years of surpluses. We’ve got three and a half billion in a rainy day fund. We scheduled that out over the next two years to make sure that some very prudent tax cuts were proposed. We’ll be able to maintain that even in the case of a recession,” Lamont said.
Adding to the issue, motor vehicle values have increased during the pandemic, nearly 23% making for even higher tax bills.
If the legislature passes, this tax cut would kick in on July 1, 2022.