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Statewide Vehicle Tax Could Leave Homeowners Paying More

A proposal to implement a statewide vehicle tax could leave Connecticut residents paying less property tax for their cars, but ultimately more property taxes on their homes.

The plan would eliminate municipal car taxes and replace them with a 19 percent state car tax. The state would collect the revenue and then redistribute it to municipalities through Connecticut’s various municipal aid programs, including state education aid and the PILOT program.

PILOT, or Payment In Lieu Of Taxes, are payments made to municipalities which house government buildings to make up for the fact that the state doesn’t pay property taxes on those buildings.

Naturally, cities like Hartford and New Haven have many more government facilities than smaller municipalities. Those cities also receive much more education funding from the state than towns.

The plan means towns would lose revenue from the vehicle property tax and have little assurance they would receive those funds back from the state. Connecticut has a history of withholding or decreasing municipal aid payments when faced with a budget deficit.

Gov. Dannel Malloy decreased education funding to a number of towns over the past few years, and Gov. Ned Lamont has proposed decreasing that funding at a faster rate for a number of towns.

So, some towns will have to find a way to make up the difference for the loss of revenue and that will likely mean higher property taxes for homeowners and businesses through increasing mill rates.

A number of town officials have questioned whether they would ever see the revenue returned, while city officials have praised the idea as a way to decrease the financial impact of the car tax on their residents, while receiving more revenue from the state.

Connecticut’s cities already have high property tax rates that are much higher than surrounding suburbs.

In an interview with the Hartford Courant, Bridgeport Mayor Joe Ganim said “I think obviously anybody who doesn’t understand the challenges of Connecticut’s cities and the two Connecticuts … is missing the mark. If we’re ever going to move this state forward, it’s going to be with recognizing that our cities have to play a prominent role.”

Yankee Staff

Yankee Institute is a 501(c)(3) research and citizen education organization that does not accept government funding. Yankee Institute develops and advances free-market, limited-government solutions in Connecticut. As one of America’s oldest state-based think tanks, Yankee is a leading advocate for smart, limited government; fairness for taxpayers; and an open road to opportunity.

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