Connecticut lawmakers are attempting what has long been deemed impossible – eliminating the state’s motor vehicle property tax, perhaps the most hated tax in a state long known for its high taxes, but the legislation faces opposition from both municipalities and the governor’s office.
Lawmakers on the powerful Finance, Revenue, and Bonding Committee approved Senate Bill 1554 on a bipartisan basis, which would eliminate the car tax over several years by diverting savings on the state’s annual pension payments from Connecticut’s pension pay downs into an account to reimburse municipalities for lost vehicle tax revenue.
Connecticut’s motor vehicle property tax brings in roughly $1 billion per year for the state’s 169 municipalities, hitting residents with tax bills in the hundreds or thousands of dollars, depending on the make, model, and year of the vehicle. Under the state’s 2017 fiscal guardrails, Connecticut has amassed a $4 billion Rainy Day fund and has paid down more than $8 billion in pension debt, generating $725 million in lowered annual payments.
Those annual payment savings, however, have already been used up, including Gov. Lamont’s move to lower taxes, and to support the programs, agencies, and organizations pushing for more support from the state’s General Fund. SB 1554, however, would build up the savings over time before they can begin to eliminate the vehicle tax over a course of years, depending on the amount of money in the reimbursement account.
Connecticut’s two major municipal organizations — the Connecticut Conference of Municipalities (CCM) and the Council of Small Towns (COST), testified in opposition to the bill, saying they, too, would like to see the vehicle tax eliminated but were distrustful the state would honor its commitment to reimbursement, and that they would need the ability to find other sources of revenue.
“The elimination of the car tax is a goal that we all support but should be part of a comprehensive reform of the property tax system combined with needed municipal revenue diversification that will reduce the overreliance on the property tax,” Randy Collins of CCM wrote in testimony. “Any plan that eliminates more than $1 billion in local revenue should provide for revenue diversification as a sustainable means to replace that revenue.”
“Although Governor Lamont and state lawmakers have maintained their commitment to reimburse municipalities for lost car tax revenues, towns continue to be concerned that such funds may be swept if the state faces fiscal challenges,” wrote Betsy Gara, executive director for COST.
The legislation was also opposed by Gov. Ned Lamont’s chief budget official, Jeffrey Beckham, who argued the funding is based on volatile tax revenue sources and pension payments that, likewise, are affected by market conditions.
“This would be especially relevant if the account has sufficient revenue to fully exempt motor vehicles in one year, but not in the following year,” Beckham wrote. “This potential for volatile swings in assessed values would ultimately be a disservice to taxpayers and would undermine the state’s recent efforts toward providing stability and transparency to motor vehicle valuations by switching to a method of assessing such property based on depreciation instead of market value.”
Connecticut, which is regularly listed as one of the states with the highest property taxes in the nation, is one of 31 states to implement a property tax on vehicles. The cost leads some residents to register their cars in states like New York or Maine in what has been called “one of the largest forms of tax evasion in the state.” Some town assessors have gone so far as to hire individuals or companies to go looking for out-of-state licenses.
In recent years, the legislature has tried to lessen the vehicle property tax burden by capping the mill rate at 32.46 mills – a move that affected 75 municipalities that had higher mill rates.
In 2022 and 2024, the legislature adjusted the valuation method by which municipalities calculate the vehicle tax, shifting from assessing vehicle values based on the National Auto Dealers Association used car values, to a set depreciation schedule as on the Manufacturer’s Recommended Retail Price to avoid potentially wild swings in the used car market as were seen during the COVID supply chain crisis.
That change, however, caused some problems at the municipal level and sent lawmakers back to the table to adjust the depreciation schedule, moving the one year depreciation to 90 percent of the vehicle’s MSRP.
During the committee vote, Sen. John Fonfara, D-Hartford, said annual payment savings would go into the account for municipalities to reduce the car tax, but during years there are no savings nothing would change at the municipal level. Fonfara said it could ultimately take “25 years” to get enough money to eliminate the car tax, depending on the economy and revenue.
Sen. Ryan Fazio, R-Greenwich, said he ultimately supports eliminating the state’s vehicle tax but did not feel that this was the right way to do it, particularly as it moves hundreds of millions of dollars off budget into separate accounts.
“I and many others, especially in the Senate Republican caucus are supportive of the intention to reduce car taxes in this state. They’re a burdensome tax, an annoying tax, a stupid tax and we do need to do things in this building in order to alleviate that burden,” Fazio said. “There’s a lot of good ideas in this bill and if there were some changes, I think a lot of Republicans who might be a ‘no’ today could get to a ‘yes.’”
Rep. Joseph Polletta, R-Watertown, said he supports the bill because it would utilize pension savings that taxpayers have paid for to effectively lower taxes by reducing and hopefully eliminating the car tax.
“The idea that we are actually going to realize the benefits from our good fiscal policy the last five years is very appealing to me,” Polletta said. “If we can realize some savings from good fiscal policy than why not give it back to the taxpayers?”
Sen. MD Rahman, who cosponsored the bill, described how difficult it was for him when he first moved to Connecticut and worked several minimum wage jobs while trying to save money to buy a car, only to find that he had to pay property tax on the car in addition to insurance and maintenance.
“Finally, the most regressive, unfair, and complicated tax, finally we are moving in the right direction for our state,” Rahman said. “There are so many people like me, and they can’t afford to pay car insurance, car maintenance, tax and taking care of their family making minimum wage. I think this bill will help those working people and they can take care of their family.”
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I agree with getting rid of car taxes. Besides young families and even older families who are still working. Think about the older folks on SS ONLY. it’s hard enough to just live on SS. never mind a car tax. Reg. Ins. Oil. New lic. We need to get now. Everyone needs a break, or many will just go to uber. Like renting a home instead of owning. Why pay for all the expensives of a car when you can now uber. Have groc. Del. Etc. even if you spend 500 a month on uber it’s cheaper than owning a car. Gas. Maint. Reg. And that car tax. And ins. Car ins. Is 250 a month prob. Higher. So get rid of tax. It’s already exp. To own a car. Don’t we pay tax when we buy the car? Where does that money go. Why not into a fund to give back to municipalities. I have no clue, but how many cars are sold in a year in ct. Whats the tax brought in every year on sales of cars trucks etc. I’m sure it’s more than we all think.
I’ve lived in this state my whole life, we did great without the income tax. Frankly, the fact that this state is a sanctuary state for illegals , 85% who are illiterate in their own language, is the problem! CT cities look like 3rd world cesspools. Lamont’s snotty aides who answer his office phones are rude when you call to complain about the unskilled, uneducated, criminal illegals and the crime. This population has created a grift that people connected to the Democrat ruling class get rich from via NGO’s and contracts. We could easily do without the car tax which I loathe, kick out the illegals and END the equally worthless green energy policies. Lamont could be a good governor, instead he surrounds himself with dim leftists who have zero real world work experience. They don’t work with their hands they don’t know how to fix or make things and just have circular leftist talking points. I’ve seen his entourage, diversity in appearance no diversity in thought. It’s a cancer.
I disagree with this. We need to get rid of the pension debt then maybe we can eliminate the car tax. Like any good financial advice you have to pay off your debts 1st. Once that debt is paid there should be extra money then we can eliminate the car tax. Prior Many towns received the money that was suppose to originally pay for the state pensions. Everyone looked the other way when the state didn’t contribute to the pension system because they were benefiting from the money. It’s time to do what is right and pay our debt.
Get rid of the car tax. One main reason we will probably retire out of the state.
I’ve seen the video just tax them they won’t know
Do something for the people!
They are not so much as proposing to eliminate the car tax, as they are proposing to hide this tax inside of our state income and sales taxes. They are just playing a shell game. Sadly, too many CT residents fall for this sort of smoke and mirrors legislation, year after year.
Get rid of the car tax… Yet another reason people move out of state to retire.
MV tax is the biggest scam! You should only have to pay the tax on the date of purchase. To continue paying a tax on something you own is absurd. I don’t pay a yearly tax on the clothes I purchase or the food I continue to eat. Get your hand out of my pocket. And Iagree with comment above from Peter D’Aloisio…. this is a shell game. They would never just eliminate it without finding a way to bury it elsewhere under a different name.