Gov. Dannel P. Malloy's car-tax proposal should go back to the drawing board.
Mr. Malloy's budget proposal called for eliminating the tax on motor vehicles valued at $28,500 or less. He has called the tax one of the most unfair levies on the books. He's right — it is. As Mr. Malloy has pointed out, a car owner pays a tax rate of 11 mills in Greenwich or 75 mills in Hartford on the same car. A car assessed at $10,000 would cost $110 in taxes in Greenwich and $750 in Hartford. That's wrong.
But while Mr. Malloy has the right diagnosis, he has the wrong cure. Eliminating the car tax will cause cities and towns to lose between $633 million and $700 million in revenue, depending on the estimate. This will cause towns to increase property taxes on land, buildings and their improvements, a burden that will fall largely on businesses.
Raising taxes on businesses is the last thing this state should be doing, if Connecticut is trying to compete with the rest of the country. According to the Council on State Taxation, property taxes constitute the largest share — 33.5 percent in 2010 — of state and local taxes paid by businesses in Connecticut. Anything we can do to keep that number from going up is to the good.
A property tax on cars is not a bad thing. Cars are a source of expense for municipalities (police, roads, utilities), and it is appropriate for users — car owners — to help shoulder the cost. But is must be done fairly, perhaps through a uniform statewide assessment, so the same car is taxed at the same rate in each town.
The debate over the car tax is another sign that the state needs to change its archaic and often counterproductive property-tax system. But to start by eliminating the car tax is sort of like starting a baseball game in the eighth inning.
Reprinted with permission of the Hartford Courant.
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