Rhode Island's car tax must go
I have heard repeatedly from Rhode Island’s citizens that the car tax is fundamentally unfair and they want it eliminated.
Earlier this year, I announced my initiative to phase out the onerous and regressive car tax within five years. The budget the House will adopt this June will provide approximately $40 million in car tax relief, which will continue over the next five years until it is completely eliminated.
This will mean that many Rhode Islanders – especially the middle class – will see relief immediately. Further, cities and towns will be reimbursed for their lost revenue.
This will make for impactful, meaningful change. This is what our citizens want, and we represent them and their interests. Our government has to be more responsive to the will of the citizens its represents.
Doing away with the car tax will yield two distinct benefits toward improving the state’s economy. It will place more money into people’s pockets, which will result in greater personal spending. Eliminating the regressive car tax will also lead to an increase in automobile sales, which will benefit car dealers, the economy and provide more revenue for our state.
Few things are more discouraging than reading that our state ranks last in a 50-state comparison. Three factors have led to these poor ratings: uncompetitive business taxes, deteriorating infrastructure, and high municipal property taxes.
Since becoming Speaker in 2014, we have addressed the first two issues. We reduced our state’s corporate tax rate from the highest in New England to the lowest, we eliminated the sales tax that businesses previously paid on their energy costs, and we have twice lowered the corporate minimum tax businesses must pay on an annual basis. Regarding our failing infrastructure, we have taken major steps to repair our roads and bridges.
Now it is time to tackle our property taxes, and there is no question that the car tax is one of the reasons why our property taxes are so high. According to WalletHub, Rhode Island has the highest car taxes in the country.
Thousands of hard-working Rhode Islanders have candidly told me how the car tax burdens their family’s finances. By joining the 24 other states without a car tax, we can give working families much needed tax relief and improve quality of life throughout our state.
I believe the state budget, which is $9.2 billion, contains room for savings. The House found over $60 million in tax cuts in recent budgets. We used those savings to reduce the cost of doing business in Rhode Island and retain and attract new jobs.
Our economy is naturally generating more money from savings and economic growth. The House will continue to look for additional savings. Now that we have a competitive business climate, I propose we give those savings and revenue from economic growth directly back to the taxpayer in the form of car tax relief.
RIPEC published a report earlier this year that found Rhode Island’s property taxes to be the fifth highest in the country. The Tax Foundation, the nation’s leading independent tax policy research organization, ranked Rhode Island as the sixth highest in property taxes. Eliminating the car tax will move Rhode Island towards the center of the rankings.
Two decades ago, state leaders attempted to phase out the car tax but were forced to retreat when revenues plummeted during the Great Recession. Now that Rhode Island has started to regain its economic footing, we must have the political courage to eliminate the onerous car tax once and for all.
Speaker Nicholas A. Mattiello is a Democrat from House District 15 in Cranston.