Senate leader pledges commitment to capping ‘unfair’ car tax

Senate leader pledges commitment to capping ‘unfair’ car tax

Meriden Record Journal, May 25, 2016

By Mike Savino

Senate President Pro Tempore Martin M. Looney said Democratic leaders remained committed to a cap on municipal motor vehicle taxes, despite difficulties facing the state budget for the foreseeable future.

The legislature raised the cap on car taxes next fiscal year to 37 mills to account for a $50 million transfer to help address the budget deficit next year, but Looney, D-New Haven, said lawmakers continuation of the program is “a sign of how much we’re committed to it.”

The transfer was part of a fix to close a projected $960 million deficit in the previously approved budget for next fiscal year, and lawmakers raised the car tax cap from the originally approved limit of 32 mills to account for the change.

Meriden and Middlefield were among roughly 30 towns left scrambling to account for unexpected drops in state revenue because they suddenly fell under the cap, leaving towns like Cheshire skeptical as they approach the limit for fiscal year 2018.

Cheshire Town Manager Michael Milone said the “whole program has been compromised and bastardized,” and he’s concerned the state will make similar changes to the cap in the future. The budget implementer drops the cap to 32 mills in fiscal year 2018 – the original budget approved last June set that limit at 29.36 – and Milone said he’ll need to account for that. Cheshire’s mill rate for next fiscal year, which starts July 1, is 31.19 mills.

Milone said his budgeting process will include looking at the effect of spending plans that could raise the mill rate by as much as one mill, but he won’t assume the corresponding state aid for exceeding the cap. “My concern is the state is not going to have the money to reimburse towns for the lost revenue,” Milone said.

Some towns that found themselves under the 37 mill limit decided to cut spending to account for the sudden loss of a reimbursement. Others, like Meriden, decided to modify their plans and levy the full mill rate on motor vehicles.

Meriden City Manager Lawrence Kendzior said his city ultimately has the same amount of revenue for its budget, but towns officials won’t give the reimbursement “the same point of emphasis they gave in the past year.” Kendzior said that assuming the cap, and reimbursement, “does build up an expectation...on how people expect to be taxed.”

Lawmakers to keep promise back to top

The legislature didn’t make the change public until early May, after many cities and towns had or were poised to vote on their own budgets, causing “some consternation and difficulties,” Connecticut Conference of Municipalities spokesman Kevin Maloney said.

Maloney also said “it remains an open question and a concern” whether the state will have enough money in the Municipal Revenue Sharing Fund – fueled with one-half percent of the sales tax – to continue with the cap as planned when it faces deficits exceeding $1 billion annually in upcoming fiscal years.

Looney said he expects lawmakers to make good on their promise, noting the roughly $820 million in cuts in the budget fix approved earlier this month provide savings in future years. The legislature’s nonpartisan Office of Fiscal Analysis said the spending reductions also shave more than 40 percent off deficits, previously projected to eclipse $2 billion, in both fiscal years 2018 and 2019.

Maloney and Milone also raised concern that the state will provide reimbursements based on the Oct. 1, 2014 grand list, meaning towns exceeding the cap likely won’t receive full reimbursement for revenues lost. Looney said municipal leaders complaining about the car tax and corresponding reimbursement are overlooking a “very substantial form of property tax relief.”

He has repeatedly said the motor vehicle tax might be the most unfair tax in the state. Looney also said the state’s cap, which he championed last year, provides a reimbursement to towns while trying to equalize tax payments for car owners around the state. “They’re ignoring the fact that individual taxpayers are getting relief,” he said.

The proposal was absorbed into a package of changes, along with more funding for payments in lieu of taxes and new municipal revenue-sharing grants, that were adopted as part of last June’s two-year budget. Milone, Kendzior, and Maloney all agreed with Looney that the car tax is unfair. Milone, though, said Looney’s solution “jeopardizes the sources of revenue we already have.”