Could CT end local vehicle taxes? It's being considered

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The Connecticut State Capitol, in Hartford, Conn. Jan 24, 2023.

State Sen. Tony Hwang, R-Fairfield

Senate Majority Leader Bob Duff, D-Norwalk.

Senate President Pro Tempore Martin Looney, D-New Haven

State Sen. Ryan Fazio, R-Greenwich, whose affluent hometown has one of the lowest tax rates in Connecticut.

First-term state Senator Herron Gaston, D-Bridgeport.

HARTFORD — After an extensive debate on the long-simmering disparity of Connecticut's local tax rates - where affluent towns have substantially lower mill rates than cities - the state Senate last week approved legislation that would be a first step toward eliminating the levy while still providing towns and cities the revenue needed to help run local government.

The bill, approved unanimously and which heads next to the House of Representatives, would create a task force with a February 2024 deadline to study and make recommendations on ways to repeal the motor vehicle property tax, and possibly replacing the lost local revenue through ways including a new 8-percent tax on insurance premiums.

"This bill is a great bill and will support millions of Connecticut residents," said first-term Sen. MD Rahman, D-Manchester, co-chairman of the legislative Planning and Development Committee, who introduced the legislation for debate, noting that residents of 18 states do not pay local taxes on their personal vehicles, including New York, Pennsylvania and Maine.

It set off an 80-minute discussion on local government and the inequities of high rates in cities, where much of the state's regional social and medical services are located and where large amounts of untaxable properties, including hospitals and institutions of higher learning are located, place an added tax load on homeowners.

"This is an issue that impacts every community, especially cities and poorer communities because they happen to have higher mill rates than some of their suburban counterparts," said Senate Majority Leader Bob Duff, D-Norwalk, who in recent years has proposed eliminating the tax, drawing the ire of municipal officials. "If it's our policy here in the state of Connecticut to invest in our cities and to reinvest in our cities and have people move into our cities, then one of the impediments of that is the car tax. That is a tax that gets people right on July 1, when they are least expecting it."

In remarks toward the end of the debate, Duff said he thought that bipartisan negotiations came close to ending local car taxes in 2017. Last year, a law was approved capping 32.46 mills on car taxes in 72 towns and cities along with accompanying reimbursements for lost municipal revenue.

"I'm glad to see this renewed enthusiasm for eliminating the car tax once and for all, because I think that that is an important step that this body can take, finally, finally, to talk about this at all," Duff said. "We have a number of things in Connecticut that other states don't have and for that I am proud, and for that, I think people are willing to pay a little bit more to have those things."

"Unlike the income tax, which is based upon income, your property tax is not adjusted by a sudden downturn in your income," said Senate President Pro Tempore Martin Looney, D-New Haven. "A car is a car is a car and yet we have 169 different mill rates. We have to recognize that if we are going to be fair, if we are going to recognize some of the deficiencies that our system of government of 169 completely, jealously self-protective municipal fiefdoms have, we pay a price for that in many ways and one of those prices is the car tax and how it is unfairly applied."

"We all know that property taxes are quite high here in Connecticut," said Sen. Ryan Fazio of Greenwich, a top Republican on the planning panel. "We are one of a couple dozen, maybe 20 states that has the property tax for motor vehicles, so that's a double whammy to our residents in this state. Not only are you among the minority of states that has to pay property tax on a motor vehicle, but the rate at which you are paying it is among the highest in the country."

Greenwich's mill rate is 11.28, while Bridgeport's, prior to last year's cap, was at 43.45 dollars of tax on every thousand dollars of a motor vehicle's value. First-term state Sen. Herron Gaston, D-Bridgeport, said that his hometown, the state's largest city, has huge gaps between the wealthier residents and those with lower incomes.

"Time and time again when I knocked on doors as I was campaigning, people kept saying we need to eliminate this car tax," Gaston said. "It is a burden. It is standing in the way of people who are on fixed incomes who are barely making it, and for a long time we have had the foot on their neck. It's time that we gave them some level of reprieve."

Members of the task force would include representatives from non-profit advocacy agencies including residents over the age of 50 such as the AARP; statewide municipal organizations; the insurance industry; higher education; and the General Assembly.

"For this task force to really begin its work, I would make a couple of suggestions," said Sen. Tony Hwang, a Republican from Fairfield, where the mill rate is 27.24, according to recent state data.

"I think one is to understand that the motor vehicle tax has a direct impact on our municipalities, otherwise it would not be so stubbornly maintained for all of these years," Hwang said. "I remember back in the distant past that the motor vehicle tax was supposed to be temporary. And that's a challenge when we look at taxes: once a tax is put in place it's awfully hard to take it out. But we need to understand that we need to live within our means. We have created a dependency of our municipalities on this motor vehicle tax, and its inequities, based on mill rate that has created such havoc and impact on communities, and the disparity."