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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. 

Bill February 12, 2013 at 02:31 PM
Hey, here's a novel idea. Take an axe to salaries and pensions of overpaid govt. employees. And regarding property taxes, they are outrageous as it is. Eventually the town will own all the homes and they will become landlords, the property taxes replaced with rental income.
Grizzled Vet February 12, 2013 at 04:14 PM
Boo overpaid government employees, pile on! My taxes are outrageous and thanks to this reverse-Robin Hood policy, decent Joe's like myself find ourselves in need of a bail-out. Signed, Vet

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