Sen. Jason Welch: Malloy’s car tax cut – not so fast

Sen. Jason Welch: Malloy’s car tax cut – not so fast
Published: Thursday, March 07, 2013

The governor’s 2011-12 budget hurt the middle class with the largest tax increase in Connecticut history. Now that the 2014 election is around the corner, it seems as though he is trying to make up for it with tax cuts. But these tax cuts should raise serious questions.

The governor has proposed to get rid of the car tax. At first blush, this sounds like a good idea. The details however, reveal a very different story.

According to the bipartisan Office of Fiscal Analysis, eliminating the car tax represents an estimated loss of $632.8 million in municipal revenue, not state revenue. Most towns cannot afford this loss in revenue, so property taxes will go up on homes and businesses.

Here is an example of how that may work.
In Bristol, the city assessor estimates the total mill rate shortfall from the loss of the car tax revenue stream could be 3.8 mills. The potential impact can be seen by using the following example for a house valued at $240,000 and a house valued at $340,000 — both of which can be considered middle class.

The potential residential tax increase is in the table below.

The governor claims this tax cut will help the middle class, but, the governor’s statement is not true for all. It depends on the value of the car(s) that they own. Considering this economic climate, many families have not been purchasing new cars in the past few years. With the scenarios above, if you have two cars that are a few years old you probably pay about $200 per car annually. That is far less than the increase in property taxes as laid out in this Bristol example. Bottom line, you are not getting a break under the governor’s proposal. In fact you are losing several hundred hard-earned dollars.

To make matters worse Gov. Malloy was also not upfront about the state’s windfall in this car tax shell game. The budget he proposed shows a $21 million gain from the elimination of the car tax on motor vehicles. This increase in revenue to the state would occur because car owners will no longer be able to claim a credit for vehicle taxes on their income tax returns.

So what does the governor’s scheme give us? A tax cut, that will raise our taxes and increase state revenue. Rather than trying to fool Connecticut residents, the governor should try cutting state spending and lowering state taxes.

Fool me once, shame on you. Fool me twice, shame on us.
The governor’s 2011-12 budget hurt the middle class with the largest tax increase in Connecticut history. Now that the 2014 election is around the corner, it seems as though he is trying to make up for it with tax cuts. But these tax cuts should raise serious questions.

The governor has proposed to get rid of the car tax. At first blush, this sounds like a good idea. The details however, reveal a very different story.

According to the bipartisan Office of Fiscal Analysis, eliminating the car tax represents an estimated loss of $632.8 million in municipal revenue, not state revenue. Most towns cannot afford this loss in revenue, so property taxes will go up on homes and businesses.

Here is an example of how that may work.

In Bristol, the city assessor estimates the total mill rate shortfall from the loss of the car tax revenue stream could be 3.8 mills. The potential impact can be seen by using the following example for a house valued at $240,000 and a house valued at $340,000 — both of which can be considered middle class.

The potential residential tax increase is in the table below.

The governor claims this tax cut will help the middle class, but, the governor’s statement is not true for all. It depends on the value of the car(s) that they own. Considering this economic climate, many families have not been purchasing new cars in the past few years. With the scenarios above, if you have two cars that are a few years old you probably pay about $200 per car annually. That is far less than the increase in property taxes as laid out in this Bristol example. Bottom line, you are not getting a break under the governor’s proposal. In fact you are losing several hundred hard-earned dollars.

To make matters worse Gov. Malloy was also not upfront about the state’s windfall in this car tax shell game. The budget he proposed shows a $21 million gain from the elimination of the car tax on motor vehicles. This increase in revenue to the state would occur because car owners will no longer be able to claim a credit for vehicle taxes on their income tax returns.

So what does the governor’s scheme give us? A tax cut, that will raise our taxes and increase state revenue. Rather than trying to fool Connecticut residents, the governor should try cutting state spending and lowering state taxes.

Fool me once, shame on you. Fool me twice, shame on us.