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Car Tax Not Going Away Anytime Soon

A taskforce mandated by the General Assembly to devise funding alternatives to replace the car tax will miss its Feb. 1 deadline, after failing to reach an agreement during its latest meeting held Wednesday (Jan. 31). 

Currently, the tax generates $1.04 billion in annual municipal revenue.  

A solution to recoup the funding shortfall was shared on Wednesday, by Sen. MD Rahman (D-Manchester), chair of the Motor Vehicle Property Tax Taskforce. Rahman suggested maintaining the 32.46 mill rate cap (implemented in 2022) solely on commercial vehicles. He argued that this measure could “generate $200 million.” However, his proposal lacks recommendations on how to tackle the remaining $840 million shortfall. 

This proposition joins a list of misguided ideas emerging from the taskforce. During the Jan. 8 meeting, Vice-Chair Rep. Brandon Chafee (D-Middletown) adhered to the progressive playbook by suggesting a tax increase on the rich. Under his plan, individuals earning between $1-$2 million would face a 1 percent increase in their state income tax bill, potentially generating $369 million in additional state revenue. For those with incomes exceeding $2 million, Chafee advocates for an 8.99 percent tax rate, anticipating an additional $177 million; furthermore, his proposal introduces a 4 percent surcharge on capital tax rates, contributing an estimated $584 million in revenue. 

In the same meeting, Jennifer Gauthier from the Office of Policy and Management (OPM) proposed a hike in the gas tax with the idea that individuals driving more would face higher costs and additional revenue could be garnered from out-of-state drivers. However, the push to increase the number of electric vehicles (EVs) in the state has already led to a reduction of gas tax revenue, a trend that would further decline if the General Assembly successfully bans the sale of new gas-powered cars by 2035. 

During the taskforce’s Oct. 24th meeting, Gauthier also suggested that towns might not necessarily lose revenue if the tax were eliminated; instead, it would just be shifted to property and business owners. 

Mark Boughton, Commissioner of Connecticut’s Department of Revenue Services reiterated remarks from previous meetings that more data is needed to fully understand the effects of eliminating or adding taxes. He also stated that the committee needs more time to develop a well-researched and comprehensive plan before finalizing an end product. 

“I think we’re nowhere near ready to report anything except that we want to keep working,” Boughton said. The commissioner highlighted the goal of ensuring the taskforce’s efforts lead to tangible actions rather than a report that “sits on the shelf and people wave off.”  

Boughton suggested that the taskforce seek an extension from the legislature to ensure the taskforce’s ability to achieve a more effective and impactful outcome. In response, Sen. Rahman announced one more meeting, although the details were not solidified. 

During the 2023 session, the General Assembly proposed compensating towns for the lost car tax revenue by granting them the power to impose licensing fees on landlords. These fees would apply to the rental of dwelling units or homes, accompanied by an annual fee for each rented unit or home. Moreover, the proposed bill intended to introduce an eight percent surcharge on the revenue derived from homeowners’ insurance policies and personal risk insurance for motor vehicles. 

In the end, due to lack of support for the bill, its language was removed and substituted with the establishment of the task force. 

Meghan Portfolio

Meghan worked in the private sector for two decades in various roles in management, sales, and project management. She was an intern on a presidential campaign and field organizer in a governor’s race. Meghan, a Connecticut native, joined Yankee Institute in 2019 as the Development Manager. After two years with Yankee, she has moved into the policy space as Yankee’s Manager of Research and Analysis. When she isn’t keeping up with local and current news, she enjoys running–having completed seven marathons–and reading her way through Modern Library’s 100 Best Novels.

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