One percent of the sales tax will be split in half, funding transportation and a cap on the car tax.
The state legislature left some work to do after the regular session ended, but it did change the way the car tax is applied across the state.
Speaking on WNPR's Where We Live, panelists broke down the way the state budget would affect the tax and how complex it appears to be.
The Democrats have said they're giving property tax relief, and investing in a new transportation stream of funding using some of the state sales tax. Just how would this work?
The panel includes host John Dankosky, WNPR's Colin McEnroe, Associated Press reporter Sue Haigh, and Hartford Courant business reporter and columnist Dan Haar.
Below is a transcript of the conversation.
SUSAN HAIGH: This is actually something that the Democrats bring up to counter the complaints from the business community. They said that we have made strides to try to address two problems that the business community has complained about for years -- probably what everybody's complained about for years -- transportation and high property taxes.
"If your town has a higher mill rate than that [car tax] cap, this money will make your town whole."
Susan Haigh
So the plan is that of those 6.35 percent sales tax, one percent of it will be split in half. Half will go to the state’s special transportation fund, which is the main account that takes care of roads, bridges -- all that stuff -- because that’s projected to be in default a couple years down the road, because we are not getting as much from the gas tax.
The other half-of-a-percent will take care of a cap on local car taxes.
So they will have a cap, and if your town right now has a higher mill rate than that cap, then this money will make your town whole. Some of these funds will go in there and cover that.
There’s also additional money in there for payment in lieu of taxes, grants that the state provides communities if they have certain untaxable property, like state parks or a prison, things like that.
I’ve heard some concern from smaller communities that don’t have these big payment in lieu of taxes grants. They usually don’t get them, and they're concerned that they’re going to be frozen at 2015 levels.
There’s also some of this half-of-a-percent supposedly going to regionalization-type efforts to try to fund those, and hopefully, in the lawmakers' minds, to make the state more cost-efficient.
JOHN DANKOSKY: So we’re splitting up all this one percent. I mean, all this car tax thing that I think is important to understand is: while there’s property tax relief coming back to the towns, there’s also a slight rollback on the exemption that you can take when you file your taxes.
"We're splitting up this little tiny percentage."
John Dankosky
It used to be, years ago, you get $500 that you could claim on your car. Now it’s down to $300 -- now that’s going down. Anyway, so that is someone offset this, this help that’s coming back to the towns for property tax relief is somewhat being offset, right?
HAIGH: For the average property taxpayer, yes, they pushed it off until income year. I think they pushed it off a year, so I guess that would be 2016, and it would go from $300 to $200. But then they also changed it, too, in terms of when you can take it, what your income level is.
It’s not just a done deal for everybody. It has to do with your adjusted gross income. So it’s gonna be a little bit more complicated.
DANKOSKY: More complicated than that, oh, excellent.
HAIGH: But that’s more for the average taxpayer. I did talk to Connecticut Conference Municipalities and the Connecticut group on small towns -- COST. I don’t think they are expecting communities to really drop their property tax rates anytime soon, because the state grants to cities and towns has been pretty flat for the last few years, but the way it was explained to me is this will help them maybe not raise taxes in the future.
DANKOSKY: Okay, so while we’re splitting up this little tiny percentage, before we move on to the part that goes into the transportation fund, do you have a thought on this car tax piece, Colin?
"There's sort of a blunt edge to this reform that I have a problem with."
Colin McEnroe
COLIN MCENROE: Yeah, I think Dan and I agree more than disagree about it, for once. It’s an admirable effort, we should say, my understanding about the process was that it was a full point. They were actually talking about a full point for this whole thing, and at the last minute, that’s when [Governor Dannel] Malloy jumped in and said, "No I need half of that for the dedicated transportation fund."
But I have a couple problems with it, and maybe I should just let Dan, afterwards, explain why it is relief to places that desperately need the relief, and then it’s also relief to places that don’t need so much relief. But he could do a better job of explaining that. But actually before I yield to Dan... let me just also say... I think there’s sort of a blunt edge to this reform that I have a problem with. A lot of this, I think, probably has to do with the fact that the governor really lives in Hartford for once, and so he understands, 'cause his neighbors are telling him all the time. Hartford’s mill rate is what, like 71, right? Garaging a car in Hartford is like buying a car most places. It’s so incredibly expensive.
So, this reform is meant to rate down that mill rate to 29 or whatever the cap is, which is great, but I think Dan and I would both agree that it kind of doesn’t look at why is the mill rate 71 in Hartford.
Some of it’s because of untaxable properties, some of it’s because of just general urban problems, and some of it’s probably bad, mismanaged government, which is effectively being rewarded by writing their mill rate down from 71 to 29. So how’s that, Danny Haar?
DAN HAAR: That’s great.
MCENROE: Mill rate freedom enough for you on that one?
HAAR: Just to to be clear, the way this car tax relief works, at a cost of $85 million to the taxpayers, the state, as Sue said, caps the amount.
"In exchange for giving relief to the poor car owners in all of the poor cities -- all of them have high mill rates -- that's a sort of necessary evil."
Dan Haar
It's important to note here: it is not the town that gets the money. The relief goes to the taxpayer. My neighbor, who drives a Mercedes and lives in West Hartford -- which happens to have a high mill rate not because of poverty, but because of the, I don’t know, soccer fields, or whatever -- those neighbors that drive the Mercedes --I counted; there are seven towns that have a high mill rate above 35 that also have a very high income: Bolton, Granby, Hebron, Simsbury, Woodbridge, Glastonbury, and West Hartford.
You may say that in exchange for giving relief to the poor car owners in all of the poor cities -- all of them have high mill rates -- that’s a sort of necessary evil. But the answer is towns can set their own mill rates for cars.
There was an opinion from [Senator Richard] Blumenthal when he was Attorney General in 2006 that said there is nothing in state law preventing towns from setting a lower mill rate for cars. So the city of Hartford can, in its wisdom, say: we don’t want to charge car owners 71 mills, or four, or whatever it is; we’re going to charge them 30, which is a more reasonable rate. And that’s going to give a break to car owners.
But then they go to the state with their handout, which they are quite accustomed to doing, and saying we need more money, because we’re performing a social good, and the state can say, you know, you’re right. OPM can say, you know what, you’re right, and we’re going to add to the amount you get. And that way, they can give money to the towns that perform this social good without giving money to Simsbury, Woodbridge, West Hartford, Glastonbury, and Hebron.
DANKOSKY: You’re saying, in an ideal world, that’s how it would work.
HAAR: That’s right.
Listen below to more of the show, as the panel discussed the so-called "transportation lockbox":
The political roundtable The Wheelhouse airs on Where We Live on Wednesdays at 9:00 am.
Rob Dozier contributed to this post.
