Mayor Fears South Windsor Will Lose Millions With Car Tax Change

In presenting his two-year budget proposal, Gov. Dannel Malloy said that, “we have no desire to shift the burden to our towns and cities. This budget holds them harmless.”

Indeed, even though Malloy stripped municipalities, including South Windsor, of several traditional grants, he made up the difference with a new grant, calling it the “Hold Harmless Grant.”

But local officials are saying that towns will not only suffer harm but disaster should Malloy’s plan to do away with one of their largest sources of revenue – the car tax – take effect.

In his address, Malloy proposed exempting more than 90 percent of vehicles from the tax, which the Connecticut Conference of Municipalities estimates raises more than $560 million for Connecticut communities. In South Windsor, it would mean a loss of about $4.3 million, officials estimated Thursday.

“Owners of vehicles with market values under $28,500 would pay no property taxes at all on those vehicles,” Malloy explained, calling the plan tax relief for middle class and poor families.

Towns would have the option of phasing in the exemption in 2013 but would have to forfeit it in July 2014.

South Windsor Mayor Tom Delnicki sees a number of problems resulting from the loss.

Like many Connecticut town officials, Delnicki said that any revenue lost from car taxes would have to be made up by real property owners and businesses.

"Quite simply, there's no such thing as a free lunch," Delnicki said. "That money has to be made up somewhere."

But the group Delnicki said the car tax exemption could really hit hard is senior citizens, who may own homes but less expensive cars.

"I have a lot of concern about it," Delnicki said. "I don't think it was well thought out."

Farmington Town Councilor John Vibert had another concern: leaving the majority of residents with no tax responsibility to keep them invested in local government. 

“As far as I can tell this will just shift the tax burden from car owners to property owners. In most cases that will remove all property tax burden from renters in town and disconnect people from town government,” Vibert said.

Though the inevitable increase in real estate taxes might be passed along to renters in the form of higher rent, Vibert worried that renters wouldn’t associate that with supporting town government.

“Nobody likes the taxes but it provides them a feeling that …’my kids go to school here. I pay taxes and support this,’” he said.

Malloy’s rationale for removing the tax was that it’s “unfair” because “residents in different communities pay very different amounts on the same property value.”

State Sen. Beth Bye (D-5th District) said Malloy is just trying to keep “the balls in the air while waiting and hoping for the economy to come back.”

But she didn't back the plan.

"When you sit down and talk to residents, its one of the most unpopular taxes. So [eliminating the car tax] is a popular thing to do and that’s why governors propose it... you can say it’s unfair but mostly the governor is looking for a way to provide relief... I do think it takes one of the very few ways communities have to raise revenue away from them, so unless you replace that with something else, you've given them a difficult task," Bye said.

She advised that Malloy’s budget will be subject to a public comment period when residents and officials may voice concerns. Public hearings and bills are listed on the www.cga.ct.gov. Budget information will be listed under Appropriations.