Leaders say elimination of car tax doable

Posted

Without outlining the specifics of how it could be accomplished in the face of projections of lower state revenues, House Majority Leader and Warwick Representative K. Joseph Shekarchi said Wednesday he believes legislators would take the first step of a 6-year program to eliminate the despised car tax.

On Tuesday delivering upon a promise he made to Rhode Island during his campaign for reelection, House Speaker Nicholas A. Mattiello introduced legislation to eliminate the tax and refund municipalities the revenues they will lose through increased state aid. In the case of Warwick, the tax at $34.60 per $1,000 of valuation after a $2,000 per vehicle exemption generates more than $23 million.

According to a release from Mattiello, his bill offers immediate relief to all Rhode Islanders who pay the car tax, will help mitigate its regressive nature during the six-year phase-out and will boost Rhode Island’s ranking when compared to other states in terms of residents’ tax burdens.

“I am pleased to be able to move forward with the plan to phase out the highest car tax in the country,” said Mattiello (D-Dist. 15, Cranston). “This is the people’s initiative. I have been hearing complaints about the car tax for the 11 years that I have been a representative, and our citizens know this is an unfair, regressive and oppressive tax. I am committed to serving the people and their agenda and ensuring that our taxpayers are treated fairly, as they deserve,” he said in a statement.

But how might he pull it off given the state is already looking at a $134 million shortfall in revenues?

“The same place we’re going to find all the money…we’re going to have to make some cuts,” said Shekarchi. He said elimination of the tax “has broad based support from Rhode Islanders.” As for specific cuts in order to reimburse municipalities for lost car tax revenues, Shekarchi responded, “We have a talented fiscal staff working on it.”

Would the state also be able to afford Gov. Gina Raimondo’s free college tuition plan projected to cost $10 million in the first year?

“That’s independent of the car tax,” he said, “it’s not an either or situation. It may be possible to do a modified tuition plan.” He pointed out that out of a $9 billion state budget, the projected revenue shortfall, as well as added costs for a car tax or tuition program, are comparatively small.

Mattiello’s legislation comes at the tail end of the legislative session and after most municipalities have approved budgets for the 2018 Fiscal Year. Nonetheless, according to the release if the measure gains approval taxpayers would see relief immediately.

As defined in the release, the legislation approaches the tax on several different fronts to provide relief to all taxpayers from the start of the phase-out. It works toward leveling the field between municipalities, so that the taxes paid by individuals during the remaining years of the tax will vary less based on the community in which they live.

The legislation’s impacts on taxpayers would begin immediately with the 2018 state budget — which will take effect July 1 — as a transition year, during which the state will begin reducing the percent of retail value that can be taxed. In 2018, that percentage will drop from 100 to 95 percent, and the percentage will drop another 5 percent each year through 2023, the final year the excise tax would levied and collected.

Municipalities that have already calculated and sent out bills to taxpayers for the 2018 year would need to either offer abatements in later quarters of the year, credits for future years or refunds according to Mattiello. That could be problematic for Warwick that traditionally mails tax bills by the middle of this month.

In 2018, the plan would increase the minimum exemption that must be applied to all cars from $500 to $1,000, and would continue raising the minimum exemption by $1,000 each year until it reaches $6,000 in 2023, the final year of the tax. Currently, municipalities’ exemptions to the taxable value of the car range from $500 to $6,000. Relief would be immediate for taxpayers in the 16 municipalities that currently offer exemptions of less than $1,000, and no community would be allowed to reduce its exemption from the current level in the remaining years of the tax.

The bill also imposes and gradually lowers a cap on the rate communities can charge. In 2018, that cap will be $60 per $1,000 of assessed value— currently the highest rate in the state, charged by Providence — and will be lowered until it reaches $20 in 2023, the final year of the tax. As has been the case since 1998, no municipality would be allowed to raise its rate during the phase-out.

Finally, to help drivers with older cars, the bill immediately lowers the age at which cars age out of the tax. Currently, a car has to be over 25 years old before it is assessed at a value of $500, the current state-imposed exemption. The bill would lower that threshold to cars more than 15 years old, dropping about 150,000 cars out of a total of 747,000 off the tax rolls in the first year, according to the release.

Since the car tax supports municipalities, the state would reimburse cities and towns for the revenues lost from these changes throughout the phase-out. The changes are currently estimated to cost $26 million the first year, and up to $221 million in 2024, the first year the tax is fully eliminated.

After the phase-out is complete, municipalities will share in a fixed percentage of the existing 7-percent sales tax so that growth in those revenues translate into growth in the local aid provided.

The Speaker said he will be open to suggestions during the bill’s legislative process. He credited the Department of Revenue for providing significant technical assistance and information to House Fiscal Advisory Staff in crafting the bill, and also the League of Cities and Towns, which he said was responsive in providing information as well.

“I want to thank the countless individuals who have helped by providing input or bringing suggestions to me about eliminating the car tax. I have been able to incorporate many of the concerns that have been expressed to me over the last several months into this proposal,” Mattiello said in a statement.

The legislation is cosponsored by Majority Leader K. Joseph Shekarchi (D-Dist. 23, Warwick), Majority Whip John G. Edwards (D-Dist. 70, Tiverton, Portsmouth), Finance Committee Chairman Marvin L. Abney (D-Dist. 73, Newport, Middletown) and Deputy Speaker Charlene M. Lima (D-Dist. 14, Cranston, Providence).

Comments

9 comments on this story | Please log in to comment by clicking here
Please log in or register to add your comment
ThatGuyInRI

Let's start by saying that nobody likes taxes, we can all agree on that.

We would all love to see the car tax go away as well as nobody likes taxes.

But if the state is going to compensate the city the $23 million it will lose then that money will have to come from increased state taxes or am I missing something?

The problem as I see it is that removing the car tax gives renter's a free ride, they pay no direct tax to the city but still get police, fire, trash, DPW, and other city services as well as put their kids in the schools. This may be an unpopular opinion but it seems to me that the car tax is the only thing that makes residents contribute to the city as (nearly) everybody owns a car and far fewer people own a home.

Or am I missing something?

Please inform me unless you run incessantly for mayor.

Thursday, June 1
Thecaptain

Well, another incomplete story and more coordinated lies by Mr. Speaker. Let's breakdown the garbage legislation.

The piece states as follows: According to a release from Mattiello, his bill offers immediate relief to all Rhode Islanders who pay the car tax. IMMEDIATE RELIEF? WRONG AGAIN. It breaks down as follows:

If we were to assume that by some miracle that all of the cities and towns were able to re-do their budgets, this would be the effect.

In 2018, 22 cities would see no reduction, Warwick being one of them, 17 cities would see a $500 increase in the exemption.

In 2019, 17 cities would see no reduction, Warwick being one of them, 20 cities would see a $1000 increase in the exemption and 2 cities would see a $500 increase in the exemption.

In 2020, 15 cities would see no exemption, and 23 cities would see a $1000 increase in exemption, Warwick being one of them, 1 city would see a $500 increase in exemption.

In 2021, 8 cities would see no increase in exemption, 31 cities would see an $1000 increase in exemption.

So in fact, no substantial reform takes place until 2022 as indicated previously, the tax rate set in 2021 would not be put into effect and billed until fiscal year 2022. Bear in mind,this is the same phase out formula that was used in 2007 that failed in 2010. For those of you in Warwick, consider this. In 2010 we had a $6000 exemption. It will not be until 2023 that we get back the $6000 exemption. So it takes 13 years to get back to where we were in 2010. Do you consider this landmark legislation? Call your state rep.

According to the bill as presented, here are the annual savings (per thousand of auto value) on Mattiello bill, which would be realized July 15 2018, IF THE BILL WERE TO PASS.

Cranston - $4.24

Barrington - $4.20

N. Prov. - $4.19

Johnston- $4.14

N. Smithfield - $3.72

E. Prov. - $3.71

Pawtucket - $3.37

Woonsocket - $3.26

Exeter - $3.26

Warren - $2.60

Gloucester - $2.56

Hopkington - $2.11

Cumberland - $1.98

West Greenwich - $1.90

Coventry - $1.87

Charlestown - $1.30

Richmond - $.66

So if your car is worth $10,000 and you live in Richmond, you will see a whopping $6.32 in savings. That's a bill that jump starts the economy !!! What a joke.

Thursday, June 1
HerbTokerman

Without language to require that cities and towns get their act together this is doomed to fail in the long term.

There should be milestones that cities are required to reduce their budgets so eventually it is self sustaining.

All that will need to happen is a bad revenue year on the state level and politicians looking for an easy fix to do the same thing Don Carcieri did and just say ok cities since we're no longer going to reimburse you, but you can go ahead and tax cars again and we're back at square one.

A more realistic first step might be to do away with using NADA clean retail value and use KBB trade in value.

Have a uniform rate for all cities and towns, a depreciation schedule that falls in line with actual values of cars.

The real problem is that values are not realistic. You should get taxed at what your car is actually worth if you were to try to sell it or trade it in. Not what a dealer would get for a similar model in mint condition after profit.

Thursday, June 1
allent

that dumb guyinri. Renters don't pay any taxes? what a buffoon. you think the property owners work 2 jobs to pay the property taxes on their rental properties or they just pay them from their own 401k?. Of course not. They pay them from the rents they receive just ike every other expense from the rental unit. Typical doofus RI'er.

Saturday, June 3
WwkVoter

Massachusetts has a great car tax system. Simple, fair, uniform. Could we just implement that? NOPE. because of the arrogance of RI, we will ignore the round wheel, and invent our own square one at much higher cost!

Saturday, June 3
BigPapi

Cote - just give in to the stomach cancer already will ya. I haven't been to church in years but I'd go thank the big man if you just give up and let it beat you.

Sunday, June 4
richardcorrente

Dear ThatGuyInRI,

I agree with you in concept. Renters should not get a free ride. They should pay "something". Car taxes are a way to do that. Here is the problem. The tax varies way too much from one town/city to another. My car in Warwick is three times the car tax than it would be if it were registered in East Greenwich, where my mortgage office used to be. We should have a small car tax. It should vary a few dollars from place to place, but when Warwick is three times the cost of other places, taxpayers move to those other places. When taxpayers move out we all pay more to make up the loss.

Making the first $500 to $5,000 of value tax exempt is the issue. That causes a car valued at $6,000 to be taxed at $5,500 in some communities and $1,000 in others. Warwick is still one of the highest in total taxes because of the low tax exempt allowance which until recently was only $500.

By the way ..."incessantly"? I only ran for Mayor (or any political office) once.

Here's an offer for you. Call me at 401-338-9900. We can meet for a coffee and you can give me all your ideas. Maybe you have better ones than mine. I look forward to hearing them. I'll buy the coffee.

Happy Summer everyone.

Rick Corrente

The Taxpayers Mayor

Sunday, June 4
Thecaptain

Another year of budget hearings and the Non-Taxpayer mayor said nothing. No cognitive thought whatsoever.

Sunday, June 4
ThatGuyInRI

Sorry to offend your delicate renter's sensibilities AllenT but you don't pay property taxes, you pay rent, there is a major difference.

The property owner pays taxes on their property, regardless of whether or not said property is occupied by themselves or renters. Renters do not pay property taxes other than on their vehicles. It's a delicate point too minute for you it would seem. But hey, keep telling yourself you pay taxes if it makes you happy.

Monday, June 5