Car tax bills coming, with state budget still in limbo

Even though state lawmakers have promised a car tax ‘phase-out,’ cities are still sending out bills

WOONSOCKET – For the owners of some 38,000 motor vehicles registered in the city, the General Assembly’s failure to pass a state budget comes with a hefty price tag – about $1.3 million.

That’s how much combined relief was envisioned in the House version of the proposed budget, which stalled in the Senate on June 30 amid questions about the affordability of what was planned as a multi-year phaseout of the much-reviled excise tax.

Residents should begin receiving bills this week – a little later than usual because the city waited as long as possible to see if lawmakers could patch up their differences over the state budget. But Tax Assessor Elyse Pare says the city has no choice now but to send them out minus the relief envisioned in the proposed state budget.

“We were holding off, hoping the House and Senate would approve a budget, which unfortunately they were unable to do,” said Pare.

If the General Assembly reconvenes and approves the existing version of the budget in January, affected motor vehicle owners will receive a credit or a rebate check to make up for the overcharge.

There were a number of excise rollback scenarios that lawmakers discussed during the course of the short-circuited session. But the one that appeared to have made the final cut would have reduced excise taxes by 5 percent for vehicles manufactured after 2003. Vehicles manufactured before that would have been exempted from excise taxes completely.

Tax bills are normally due by July 15, but because they’re arriving late this year, the city has extended a grace period for the first quarter until July 28.

“They’re at the printer, and they’re in the queue,” said Pare. “We expect them to begin arriving early next week, but having them paid by the 15th is just not realistic

at this point.”

With one of the highest excise tax rates in the state, $46.58 per $1,000, motor vehicles generate about $8.8 million in revenue for the city, or about 14 percent of the levy, which is the total revenue raised from all sources, including commercial and residential property taxes.

The city offers a local exemption of $1,000 on the worth of motor vehicles, which reflect values established by the National Automobile Dealers Association, according to Pare.

Excise tax relief isn’t a new idea, but House Speaker Nicholas Mattiello made it the linchpin of his campaign for reelection in 2016 during a hotly contested race against Republican challenger Steve Frias. Mattiello called the tax “a stone in the shoe” of every Rhode Islander – a feeling that’s shared by many, including Mayor Lisa Baldelli-Hunt.

The mayor says there is no tax that is more inequitable or counterproductive than the motor vehicle excise tax, and if she had her druthers it would disap- pear completely.

It’s inequitable, says the mayor, because it’s scattershot – how much is paid is driven entirely by the worth of the motor vehicle one owns.

It’s counterproductive, she says, because it’s a catalyst for people to register their motor vehicles at an address where they don’t reside to save money. The state’s hodgepodge of motor vehicle tax rates, set by municipalities, provides an incentive for them to do just that. Baldelli-Hunt believes the fraud is widespread, but it’s unrealistic for cities and towns to ferret out the scofflaws – the resources to do so simply aren’t available, she says.

But the most pressing reason Baldelli-Hunt sees for abolishing the motor vehicle tax is that it drags down the economy, partly by frightening away newcomers who would otherwise consider buying a home in the state. Overall tax burden is one of the first things would-be homebuyers consider when they relocate, she argues, and motor vehicle taxes add significantly to the onus.

“It’s one of my biggest pet peeves,” says Baldelli-Hunt, who opposed the resurrection of excise taxes as member of the House of Representatives about a decade ago. “The elimination of the car tax would make Rhode Island an attractive place for families and professionals to move into.”

While she espouses the end of car taxes, BaldelliHunt says it up to lawmakers to figure out a way to get it done.