If House Speaker Nicholas Mattiello is to keep his promise to eliminate the car tax and keep municipalities whole, he would be looking at generating an additional $25 million in state aid to Warwick alone.

With 110,000 cars on the city tax rolls – many of them fleets for national car rental companies with offices at Green Airport – the state revenue needed to replace city taxes is more than a tenth of what is generated statewide in motor vehicle taxes.

Mattiello pledged to eliminate the car tax over five years in the closing weeks of his heated campaign for re-election. Mattiello lost the voter machine count on Election Day but came out ahead of Republican challenger Steve Frias by 85 votes after the count of mail and emergency ballots was completed.

Mattiello is sticking by his pledge to eliminate the car tax, although he hasn’t indicated how he would make up the lost tax revenues to cities and towns without raising state taxes, which he doesn’t want to do. He notes since being elected Speaker he has cut state taxes by $75 million, including cuts in corporate taxes and income taxes on Social Security benefits.

City Assessor Christopher Celeste, who has been following the issue, feels the law on motor vehicle taxes can’t just be revised if the tax is truly going to be eliminated.

“You have to rebuild. You can’t just Band-Aid a section of a law,” he said.

In an interview Thursday, Mattiello said his basic plan would be to increase the motor vehicle exemption over five years until the point that it is gone. The exemption method was applied when the state sought to eliminate the tax until the economy took a tailspin and former Governor Donald Carcieri virtually eliminated state aid to cities and towns. The exemption set by state law was rolled back to $500 and municipal rates were frozen, although they had the option of cutting rates. The city administration chose to increase the Warwick exemption to a total of $2,000 per vehicle.

Other municipalities have likewise increased exemptions, but there is no consistency between municipal exemptions or, for that matter, tax rates. That raises the question of how a state program reimbursing municipalities will be applied to achieve equity.

Mattiello assured municipalities would be reimbursed for lost tax revenues, although the particulars of the plan haven’t been determined.

“We’re working on the specific mechanisms. I’ve got my policy, finance and legal staff looking at it. But essentially, the plan is very simple. We’re going to reimburse the cities and towns for the money they’re going to lose when we phase out the car tax program. Now, we’ll look at the specific mechanics of that but there’s no specific magic there. We’ve gotta work hard on the budget, we’ve gotta balance the budget and find approximately $40 million per year to send back to the cities and towns so we can phase this tax out on behalf of the taxpayers.”

Mattiello said not a single legislator, no one for that matter, has taken issue with his proposal to eliminate the car tax. He feels it is one of the taxes that have earned the state its reputation of repressive taxation that has stymied economic growth.

“It’s a municipal tax, but our municipal taxes in Rhode Island are not competitive. It’s one of the areas that Rhode Island is not competitive. Both for the reason that our taxpayers don’t like it, I call it the stone in the shoe, and the fact that it makes us noncompetitive in national rankings, and that hurts the state. We have to get our municipal taxes under control. One way to do that, to become more competitive and address our constituents’ concerns, is to phase this one out and not allow the cities and towns to tax it anymore,” he said.

On the one hand, Celeste favors increasing the exemption over the alternative of mandating a reduction in rates. By increasing the exemption, lower valued cars would come off the tax rolls, thereby reducing the number of bills and processing. But he wonders if the plan will stick without rewriting the law.

“That’s what you did before [a plan of systematic increases in the exemption] and what’s to say that [removal of most of the exemption] isn’t going to happen again?”