Car tax pipe dream?
Could it be that Rhode Islanders don’t believe what they would like to believe?
That would be our conclusion after the recent Bryant Hassenfeld Institute for Public Leadership poll that looked at the two proposals concerning the elimination or reduction of the car tax among other issues. Not surprisingly, those polled favored a reduction in car taxes.
Who wouldn’t like to pay fewer taxes?
That’s what Gov. Gina Raimondo’s plan would do. She proposes that the tax be based on a vehicle’s average trade-in value rather than its clean value, effectively lowering the tax by 30 percent. Motor vehicle valuations have been an issue ever since the state virtually eliminated its program to phase out the tax by annually increasing exemptions. With the exemptions gone, people were suddenly taxed on clunkers they knew were worth nowhere near what they were being valued for.
Raimondo’s plan would go a long way in establishing realistic motor vehicle valuations, although it would not totally eliminate lower valued vehicles from taxation, as had been the case with exemptions.
Then there’s the surprise of the poll. When presented the governor’s plan and that of House Speaker Nicholas Mattiello to completely eliminate the car tax over five years – using the exemption system – respondents favored Raimondo’s plan by more than 72 percent. Mattiello’s plan got 52.2 percent.
Rhode Islanders aren’t slouches. Raimondo’s plan would mean a bigger cut in taxes in the first year. Long range, Mattiello’s plan comes out ahead.
We give poll respondents credit for doing the math, but could it be that they see any reduction in taxes a pipe dream and were willing to bet on one year, not five? The governor’s plan would mean the state would need to reimburse cities and towns $63 million for lost tax revenues every year going forward. Mattiello’s plan wouldn’t be as costly in the first year, but by the fifth year would require a $215 million annual reimbursement to municipalities.
This all seems a stretch given the uncertainty of other state costs with the change of administration in Washington, other programs like free college tuition that Raimondo would like to implement and a Rhode Island economy that is still sputtering despite some improved job numbers.
The Rhode Island League of Cities and Towns would love to see car taxes reduced or wiped off the books as long as the plan is sustainable. Sustainable means for the state to reimburse the cities and towns what they would have otherwise collected.
Sustainable is the operative word. Lowering or eliminating the car tax would be terrific as long as it doesn’t mean an increase of taxes elsewhere or the loss of vital services.
So far, neither Raimondo nor Mattiello have offered a viable budget plan to accompany their call to cut the car tax, and until they do Rhode Islanders should consider it a pipe dream.