Governor says Speaker's car tax plan is unsustainable

By John Howell
Posted 2/21/17

By JOHN HOWELL The governor's office took to the road last week to promote her plan to provide car tax relief starting next year and to underscore elimination of the tax, as House Speaker Nicholas Mattiello's proposes, can't be sustained. But the

This item is available in full to subscribers.

Please log in to continue

E-mail
Password
Log in

Governor says Speaker's car tax plan is unsustainable

Posted

The governor’s office took to the road last week to promote her plan to provide car tax relief starting next year and to underscore elimination of the tax, as House Speaker Nicholas Mattiello’s proposes, can’t be sustained.

But the governor’s argument hasn’t swayed Mattiello. His spokesman, Larry Berman, said Friday the Speaker wants to eliminate the car tax in five years and he is confident that can be achieved through a combination of a growth in state revenues resulting from improved economic conditions and “savings.” What’s more is that Mattiello aims to implement the first step of his plan this year, even though legislation may not be in place until after municipalities have finalized their budgets and even mailed out tax bills.

David Ortiz, press secretary to Gov. Gina Raimondo, visited Beacon Communications offices Thursday for what he termed “a bit of a road show on this.” Ortiz came prepared with an 18-page presentation outlining what municipalities generate in car tax revenues and would need to be reimbursed to cities and towns if the tax came off the books. In the case of Warwick with 110,000 motor vehicles on the city tax rolls, the tax generates $23.3 million. Warwick is second to Providence, which has a car tax nearly three times of Warwick, where motor vehicle taxes generate $35 million. Municipal car taxes collectively generate $215 million.

Mattiello has suggested elimination of the tax by increasing exemptions. He has yet to roll out the specifics of a plan, but basically it appears similar in nature to the tax phaseout plan implemented in 1998 where the state incrementally increased exemptions and reimbursed municipalities for lost revenues. Former Governor Donald Carcieri, faced with declining tax revenues because of the Great Recession, abruptly ended the program and the reimbursements in 2010.

Mattiello has suggested $45 million in car tax relief in the current budget to revive the exemption program. The following year the sum would be doubled with the amount the state would be reimbursing climbing to $215 million annually by the fifth year. Mattiello has said the added revenues would come from the improving economy and what that means to the state income and other taxes.

In order for that to happen, Ortiz said, state revenues would need to grow by 60 percent relative to the current trend of 3.27 percent per year. According to the statistics provided by the governor’s office, since the 1998 fiscal year Rhode Island has never had more than three consecutive years of 3 percent or greater growth.

In place of staged exemptions, the governor’s plan would discount vehicle valuations. Car values became a flashpoint when the state did away with all but $500 of the exemption program. Suddenly, taxpayers found they were paying taxes based on values that were greater than what their car was worth. The outrage led to the car tax revolt, with some communities reinstituting a reduced exemption to quell the rage.

What Raimondo’s plan would do is to reduce motor vehicle valuations across the board by 30 percent. The cost of this is $55 million that would go back to municipalities to cover their loss in revenues. Ortiz says this plan is sustainable through growth in state revenues and could be implemented in the 2019 fiscal year.

Berman points out that the governor’s plan wouldn’t eliminate the municipal car tax.

“Her plan is a one-shot deal and you still have a car tax,” Berman said. “The Speaker wants to eliminate it. It’s a much different vision. She wants to continue to tax people and he doesn’t.”

Berman’s read on why the governor is focused on a partial car tax relief is because “she wants the free college tuition.”

Does that mean Mattiello won’t support the governor’s plan for two years of free college? Berman said, “there are lots of questions” about the free tuition proposal.

Doing it now, whether the Mattiello exemption plan or the governor’s motor vehicle valuation reduction plan gains legislative approval, Ortiz said, would be a nightmare.

Municipalities are in the process of drafting their budgets, but the General Assembly is not likely to approve a plan and a state budget until June. Mattiello has suggested municipalities could send refunds to taxpayers. Apart from the work of issuing checks, Ortiz imagined because of changes in address people never getting their money and those funding ending up with the state as unclaimed property.

“Let’s do it right and start in 2019,” he said.

Warwick City Assessor Christopher Celeste said he consistently hears complaints over car valuations, so he thinks an across the board 30 percent reduction would be favorably received. He can’t see doing it, however, in time for the upcoming fiscal year. As the governor’s office is proposing, he said it makes more sense to pass the legislation this year and for the program to begin in 2018 with the 2019 fiscal year.

That’s not what Mattiello wants.

“When the budget is enacted in June for the next fiscal year beginning on July 1, he is committed to providing each municipality with car tax relief immediately. It would be up to each community to work out a plan as to passing on that relief to the taxpayers; it could come in the form of rebates or future bill reductions,” said Berman.

Comments

No comments on this item Please log in to comment by clicking here