I do not usually write about pure state issues, but today I want to address the recent proposal from Connecticut governor Malloy to reduce the personal property taxes levied on automobiles in this state. For those of you who live elsewhere, you need to know that Connecticut has one of the highest (if not the highest) taxes on car ownership in the USA. Cars are put on the property tax rolls along with real estate and are taxed in the same manner. These taxes are collected by the various towns and cities across the state. Malloy, however, has now come out in favor of cutting the car taxes for two stated reasons: 1) the towns and cities spend too much money collecting these taxes for the small amount that they bring in; and 2) those who live in richer towns where the tax rate is lower pay less for their cars than those who live in poorer cities and towns. As a result, Malloy proposes that the taxes on automobiles be modified to exempt the first $20,000 of assessed value from taxation. The effect of this would be to remove cars that are valued at less than roughly $28,000 from the tax rolls since the assessed value is supposed to be 70% of the actual value.
To out it bluntly, this is one of the stupidest proposals that Malloy has ever made, and that is saying a lot. Were Malloy's proposal enacted, there would be no reduction in the cost of collecting the auto tax. Why would a town need fewer employees to send out bills to those owning cars worth $30,000 or more when the town would still need to track all cars so that a proper determination of value could be made? The only difference is that the same cost would be incurred to collect less revenue. Also, if the car tax is cut, the towns and cities are not going to cut their budgets. Instead, the real estate taxes will just be raised enough to offset the loss. That means that the people who live in the wealthier towns with lower tax rates will just pay on their homes instead of their cars. So too will be the effect in the poorer towns and cities. Indeed, the only shift in taxation will be within towns as the burden moves from those who rent to those who own their own homes. Of course, in a year or so, the rents will be adjusted to make up for the higher property taxes, so the shift will reverse. In other words, if Malloy is being honest about the reasons for his position, then his proposed solution accomplishes nothing.
The truth is that Malloy is just out grandstanding in preparation for his run for re-election next year. Many voters will be pleased to see a lower property tax bill in 2014 and will not realize that the real estate taxes have risen to make up the difference. Malloy is looking for gratitude from these voters who do not understand what has actually happened.
To out it bluntly, this is one of the stupidest proposals that Malloy has ever made, and that is saying a lot. Were Malloy's proposal enacted, there would be no reduction in the cost of collecting the auto tax. Why would a town need fewer employees to send out bills to those owning cars worth $30,000 or more when the town would still need to track all cars so that a proper determination of value could be made? The only difference is that the same cost would be incurred to collect less revenue. Also, if the car tax is cut, the towns and cities are not going to cut their budgets. Instead, the real estate taxes will just be raised enough to offset the loss. That means that the people who live in the wealthier towns with lower tax rates will just pay on their homes instead of their cars. So too will be the effect in the poorer towns and cities. Indeed, the only shift in taxation will be within towns as the burden moves from those who rent to those who own their own homes. Of course, in a year or so, the rents will be adjusted to make up for the higher property taxes, so the shift will reverse. In other words, if Malloy is being honest about the reasons for his position, then his proposed solution accomplishes nothing.
The truth is that Malloy is just out grandstanding in preparation for his run for re-election next year. Many voters will be pleased to see a lower property tax bill in 2014 and will not realize that the real estate taxes have risen to make up the difference. Malloy is looking for gratitude from these voters who do not understand what has actually happened.
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