For decades, the state legislature has tried unsuccessfully to eliminate the property tax on cars.
That trend continued Tuesday when a special taskforce ended its final meeting without agreeing on how to eliminate the tax, which has been an annoyance to Connecticut drivers.
After seven meetings since October, the 22-member taskforce issued a report but did not require the members to vote on it as they could not reach a consensus.
State tax commissioner Mark Boughton, a taskforce member and former legislator who previously ran for governor, said he could not endorse the report because the issue has not been solved. The biggest stumbling block has been that the car tax raises more than $1 billion per year for cities and towns that rely heavily on the money to balance town budgets. Without full reimbursements for the lost car taxes, the towns would have budget deficits.
“We’re not ready to issue these kinds of recommendations. We haven’t done our homework,” Boughton said via Zoom during the meeting. “We need to do more work. I am not endorsing this report because it’s not ready yet. … We barely have discussed these issues, even today. We do need some experts. … I want to be clear this is not an endorsement, at least on the administrative side, of these proposals.”
In a 62-page report, the taskforce offered two policy options for consideration. First, the car tax would be eliminated, and then municipalities could “set their own assessment ratio for real property.” In other words, the traditional 70% assessment on real estate could be increased to 75% or another number, depending on how much money the town wanted to raise. The local taxes would essentially be shifted from cars to real estate.
Second, the tax would be eliminated for personal vehicles but would remain on all commercial vehicles; truck owners would continue to pay about $193 million annually across the state.
Those ideas, however, were not formally endorsed by the taskforce members.
The vexing problem has continued as taxes are collected on more than 3 million cars and trucks that are registered statewide, officials said.
The problem is that the tax rates on the same car vary widely from town to town, depending on the local mill rate.
Gov. Ned Lamont, who lives in Greenwich, has maintained the mantra that residents should not “pay more for a Honda in Hartford than a Hummer in Harwinton.”
The driving force behind the recent effort has been Sen. MD Rahman, a freshman Democrat from Manchester who said he proposed the measure to help senior citizens, young students, and businesses. He told the story of immigrating to the United States 25 years ago from Bangladesh with only $200 and a backpack.
“Nothing in this world is easy,” Rahman told the Courant after the taskforce was formed. “The car tax is the most regressive, complicated tax in Connecticut. People said, ‘Are you crazy? You are a freshman senator.’ … I got elected, and I think I need to do something.”
New York, Rhode Island, and Pennsylvania do not collect car taxes, and Connecticut can join them, he said.
Rahman reassured members Tuesday that the ideas were a long way from becoming law.
“This is just a policy option,” Rahman said. “There is no voting. This is just a report.”
History
Ending the car tax has been a political football for more than 30 years as multiple governors have offered plans on how to cut the taxes while making sure towns are fully reimbursed. Each time, however, opposition by legislators and local officials has torpedoed the plan.
In the early 1990s, then-Gov. Lowell P. Weicker Jr. called for phasing out personal property taxes over 10 years. After Weicker’s plan failed, then-state Sen. James Maloney of Danbury successfully pushed a proposal to eliminate the tax in future years. But before that plan took effect, Weicker’s successor, Republican John G. Rowland, persuaded the legislature to repeal the law after deriding the plan as “Maloney baloney.”
Republican Gov. M. Jodi Rell then proposed a complete elimination in 2006 and 2007, while Democratic Gov. Dannel P. Malloy proposed a partial elimination in 2013 that would have applied only to cars with a market value of less than $28,500. As a result, high-end cars like Rolls-Royces, Bentleys and Ferraris would still have been taxed. But neither plan was adopted.
When Malloy proposed his idea, then-state budget director Ben Barnes said he was paying $400 per year on his Volkswagen Jetta in Stratford, but the same car would cost $1,400 in car taxes in Hartford.
One of the ideas mentioned in the report, which was not adopted, was raising the state income tax on those earning more than $100,000 per year. A chart in the report showed that those earning more than $1 million per year — representing fewer than 17,000 tax returns — paid $3.85 billion in state income taxes in the 2023 fiscal year and paid the highest effective income tax rate of any income group.
Statewide, the amounts collected in car taxes vary widely from town to town.
A small town with fewer than 13,000 residents, Windsor Locks collected $7.18 million in car taxes in the 2024 fiscal year due to numerous car rental companies surrounding Bradley International Airport. That compares to $4.97 million collected in East Hampton, which has a similar-sized population.
Politically, voters across the state have been grumbling about the levy for decades.
With all the complexities, Sen. Ryan Fazio of Greenwich says he would not be surprised if legislators are unable to resolve the problem during the short session of 2024, which starts Wednesday and ends in early May in an election year.
“This is a big issue,” Fazio, a taskforce member, told the Courant previously. “Good reforms take time, especially on big issues. It doesn’t need to be done this year. It could be done the year after or the year after that.”
Christopher Keating can be reached at ckeating@courant.com
