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Is Eliminating the Car Tax a Good Idea?

Writing those checks to the tax assessor is pretty annoying, isn't it? But here's why Patch Back's Lisa Bigelow suspects eliminating this tax may not be such a great idea after all.

Who wants to get rid of the car tax?

If you’re like most Connecticut taxpayers, chances are you thought to yourself, I do! I do! But if you’re the leader of a municipality or a member of your town’s finance board, you probably broke out into a cold sweat.

Few would argue that the Connecticut state car tax is hugely regressive; it’s also unpopular and sending those checks every year is annoying, to be sure. But ask yourself: would you rather pay the car tax as it stands now or possibly face a steep increase in your property taxes?

During last week’s budget address, Governor Dannel Malloy pointed to the elimination of the car tax as a centerpiece of his fiscal plan, along with some other political gimmickry that has legislators and watchdogs shaking their heads in confusion.

The problem is this: municipalities depend on the estimated $560 million the car tax raises to fund local budgets. As proposed, Malloy’s budget does not include a way for municipalities to recoup this lost tax revenue. Since money doesn’t grow on trees (except maybe in Greenwich), municipalities will have to figure out a way to get this revenue back on the books. Probable result? Increased property taxes.

If passed as is, the new budget will exempt the first $20,000 of a car’s assessed value from the tax. Taxpayers in affluent communities may see their taxes go up twice, because those who own cars worth more than $20K will have to pay that tax, plus make up the revenue of those who don’t. And their property taxes may go up anyway.

Republicans now face an odd choice: criticize Malloy for “cutting” taxes or support the cut and potentially wind up in deeper financial waters at home.

It’s unfortunate the governor, who campaigned two years ago on increasing transparency and eliminating one-time budget fixes, is now resorting to the same gimmickry he once criticized. And unfortunately, the shenanigans don’t end there.

Business leaders are complaining that tax hikes due to expire will now be extended under the proposed budget (is a retained tax hike the same thing as raising taxes? The Gov says no). Plus, in a picture perfect example of the sort of unintended irony only government can accomplish, the new budget, presented in a new “streamlined” fashion, caused enormous confusion among legislators who can’t find where line items are located.

But wait! There’s more! In still more budget trickery, Malloy cuts Medicaid coverage for poor parents and aid to hospitals, both of which will presumably benefit from the shift to Obamacare.

The winner? Insurance companies, who will furnish the coverage, while raising rates for everyone else.

Insurance companies will also benefit from the elimination of a state Healthcare Advocate unit funded by the insurance industry that recovers Medicaid funds paid in error. Budget Director Benjamin Barnes said the unit hasn’t been effective, but State Healthcare Advocate Victoria Veltri told the Connecticut Mirror the unit uncovered serious processing errors. It was also hampered by bad data.

But back to the car tax, which may wind up hurting us more than it helps. How will municipalities make up the revenue they so desperately need? With drastic cuts or higher taxes, or maybe even both.

Keep that in mind when it’s time to vote come November 2014. 

steve sheppard February 12, 2013 at 02:39 PM
Lisa Bigelow makes some good points, but forgets one vital one. By getting rid of the car tax a town like Fairfield will not have to pay somebody to collect and monitor those taxes. So yes get rid of the tax as it will reduce our overhead costs, pension cost, and healthcare costs.
Igor February 12, 2013 at 02:57 PM
Steve do you really think they would eliminate a position? Let's face it, if they don't take the money out of one hand, they'll just take it from another. Property tax? Car tax? A rose is still a rose and a tax is still a tax, different name same money. How else could we afford those big snow plows that everyone that got snowed in want to buy?
Chuck E. Arla February 12, 2013 at 04:12 PM
What is the current split of the car tax? Do the towns keep half? 90%? All of it?
Jim February 12, 2013 at 07:14 PM
Cutting any tax is a good idea - towns need to learn to cut back on pensions, bloated costs and function more like a real business rather than a teenager who can always ask mom or dad for more money (taxpayers)
Jake Hawley February 13, 2013 at 02:01 AM
I do not know how many people are employed by Fairfield tax payers to monitor the collection of car property tax. I would doubt more than one due to computerization. Fairfield will get the money they feel needed to run our government and schools: one way or another. Less car tax--More house tax. Malloy is playing games as well as the Fairfield First Selectman. The "pox" on all of them. Due to Connecticut taxes and Fairfield property taxes I plan to move from Fairfield in the very near future.

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