A bill eliminating the municipal car tax, replacing it instead with a state motor vehicle tax, would be an economic bust for Shelton, according to local lawmakers.
Senate President Pro Tempore Martin M. Looney’s idea for a single statewide property tax rate for motor vehicles was among the proposals in a wide-ranging finance plan submitted to the General Assembly last week.
And Shelton’s legislative contingent voiced opposition to the plan that would eliminate the present motor vehicle tax while creating a state car tax, saying that the switch would increase the burden on cities like Shelton, which would probably not receive any aid from the state, meaning a rising mill rate or slashing of services.
Republican legislators also warned that the price tag could be hundreds of millions of dollars in a shift of the statewide burden to more-affluent towns. But Looney, D-New Haven, said that the legislation is a move to finally revamp the state’s property tax system.
“First, the local car tax would go away, and, instead, residents would pay to the state of the Connecticut,” said Rep. Jason Perillo (R-113).
“The state would create a formula to redistribute funds to the municipalities, but a city like Shelton would receive less than what they pay in with this. If the way the state presently redistributes is any indicator, a vast majority of the money raised will go to the larger cities in Connecticut.”
Perillo said the loss of the municipal car tax, which went back to the city collecting it, would then leave a huge financial hole to be filled. And the remedy for the newfound shortfall would be raising the mill rate — which sits at a tight 21.15 in Shelton — to pay the next fiscal year’s bills or slashing the budget.
“The city will have to raise the mill rate to meet its budgetary needs considering the money which would be lost from the municipal car tax. That’s a guarantee,” said Perillo.
“This is another example of punishing the efficient communities and rewarding those that are inefficient,” added Perillo. “This would cause big-time hurt for a city like Shelton. To bridge the gap, house taxes will go up.”
The legislation presented by Looney has several major parts, including:
• A $50,000 tax exemption for one- to four-family owner-occupied residences.
• A one-mill statewide tax — $1 on each $1,000 of value — on real estate.
• Repeal of the local property tax on vehicles, with a new statewide vehicular tax of between 15 and 19 mills, and revenue going into a fund for reimbursing towns and cities that host tax-free institutions, such as colleges, state buildings and hospitals.
• An increase in special education and public school grants.
• A $25,000 personal property tax exemption for businesses.
Looney said that in the case of an urban house worth $200,000 and currently assessed at $140,000, under this legislation its assessment would drop by $50,000 to a total of $90,000. In a more affluent town, the assessment on a million-dollar house, currently about $700,000, would drop to $650,000.
“It’s the same homestead exemption of $50,000, which seemed to make sense,” said Looney, who in recent years supported a law capping car taxes at 37 mills.
“I think we need to go further with car-tax reform,” said Looney, noting that the proposed statewide 1 mill tax on real property would generate enough revenue to return to the towns and cities enhanced education funding as well as reimbursement for the loss of local revenue for hosting the tax-exempt properties. “This is a comprehensive way to address what we all know is the fundamental problem in the state: the property tax. For years, we’ve talked around this problem and we haven’t faced it.”
State Sen. Kevin Kelly (R-21) said these proposals, if ultimately approved, would just add another burden on already cash-strapped middle-class families.
“The goal here,” said Kelly, “is to redistribute wealth from suburban communities to urban communities, quite frankly. I believe the government closest to the people is the best, the most efficient. The people who live in the city, who pay taxes in the city, are best suited to make decisions on where their taxes are spent.
“I’m hearing a lot of ideas — grocery tax, prescription tax, tolls — all kinds of ideas on how to raise money,” added Kelly. “I don’t see any bills that would reduce the size and scope of government. Like Connecticut families, the government needs to learn to do more with less.”
The current local taxes on private vehicles represents as much as $900 million a year in revenue for towns and cities. Mill rates vary throughout the state, with cities such as Bridgeport and Hartford having among the highest while Greenwich has among the lowest.
A mill rate of 1 would have a $1 tax per $1,000 in property value, or $20 on a car valued at $20,000. Greenwich’s mill rate was 11.2 in 2018, while Bridgeport’s was 54.37 for real estate and 37 for vehicles. Fairfield’s mill rate was 25.45.