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HARTFORD — The latest iteration of a yearslong effort to eliminate the state’s car tax received mixed reviews during a public hearing on Monday, with legislators and local governments arguing the plan would do more harm than good.
The current bill proposes a five-year phase out of the motor vehicle tax, while simultaneously raising the property tax assessment rate from 70 percent of appraised value to 90 percent.
In 2023, municipalities collected approximately $1.2 billion from motor vehicle taxes, with Stamford, Norwalk, Waterbury, Fairfield, and Danbury being the top collectors. State Sen. Martin Looney, D-New Haven, noted that the legislature has been trying to eliminate this tax for nearly a decade.
“It has been the bane of our existence for many years,” Looney said. “It is highly unfair, highly regressive and in many cases we used to have communities where the motor vehicle tax was five times greater than other communities on the same car.”
The rate at which motor vehicles are taxed is currently based on the mill rate in each municipality. In 2015, the legislature capped the rate at which motor vehicles could be taxed, but Looney said there are still significant discrepancies.
Last year, the legislature created the Motor Vehicle Property Tax Task Force to determine the consequences of abolishing the tax statewide. In its report to the legislature in February, the task force suggested two methods for eliminating the tax: the first would abolish the tax and allow municipalities to choose their own property tax assessment rates, and the second would
eliminate the tax only for non-commercial vehicles.
Looney, however, argued that increasing the property tax rate would eliminate certain inequities. At the current 70 percent requirement, he said, people who can afford expensive houses also have a larger amount of property value that remains tax exempt, providing what he called a “hidden windfall” for homeowners.
“By moving gradually up to 90 percent, we will be shifting burdens where they should be shifted, and at the same time doing away with the motor vehicle tax which continues to be one that is really regressive,” he said.
State Sen. MD Rahman, D-Manchester, the chair of the task force, said he agreed with the proposal, saying the motor vehicle tax was limiting the ability of people to own cars and hindering the economy.
But organizations representing local municipalities disagreed.
“The property tax on motor vehicles generates approximately $1 billion each year in local revenues — revenues which are relied upon to fund critical services, including education, public safety, infrastructure and public works,” Betsy Gara, executive director of the Connecticut Council of Small Towns, wrote in testimony.
Secretary of the Office of Policy and Management Jeffrey Beckham said in testimony that raising the assessment rate would also mean the state would owe more money to municipalities in Payment in Lieu of Taxes, or PILOT, a system where the state is responsible for paying local municipalities a sum of money to replace what it loses on tax-exempt properties like universities and hospitals.
State Rep. Holly Cheeseman, R-East Lyme, also noted that the change would negatively affect small business owners who owned property but no fleet of vehicles for their company.
And State Rep. Dave Yaccharino, R-North Haven, expressed concern that higher property taxes would burden elderly residents and renters if landlords raise rents to compensate for the additional taxes.
“There are a lot of folks, especially older folks, who have houses that have been there for 30 years and they are having a harder time making ends meet,” he said. “We’re helping in one way, but hurting many people in the other way.”