This year, Connecticut Governor Ned Lamont signed the largest tax relief package in state history. In the budget adjustment bill was a cap on motor vehicle taxes, which dropped the mill rate to 32.46, lessening taxes for 75 municipalities across the state. However, the move, meant to ease the tax burden for cities and towns with higher vehicle taxation, didn’t completely hit its mark. With inflation and supply shortages, the price of used cars surged and with it, taxes. A Norwich man whose six-year-old car was taxed at $199 in 2021 saw his bill jump to $513 this year despite the tax cap.
Connecticut is one of 31 states that level a personal property tax on vehicles. It remains unpopular to the point that for decades lawmakers have sought to either ease the burden or eliminate it completely. But a significant number of Connecticut residents have taken it upon themselves to get rid of the vehicle tax burden – by registering their car in another state to avoid the tax completely.
It is “One of the largest forms of tax evasion in the state of Connecticut,” according to tax assessor John Chaponis. He says people who move to Connecticut and fail to register their cars with the state make up a growing population who deprive their municipalities of tax revenue.
Municipal organizations say out-of-state registrations are costing their municipalities millions in lost revenue that could otherwise be directed towards education, infrastructure and public services. Adding fuel to the fire, some states like Maine and Montana allow vehicle registrations from owners who live out of state, making the process easy for drivers.
Both city and state officials are looking to turn the tide of this growing trend, but there are physical, financial and political barriers to reform.
According to Connecticut state law, residents have 90 days to register their car before facing penalties of up to $1,000, though it can vary between municipalities. While it’s difficult to quantify the exact amount lost to those who fail to register, Chaponis estimates if even three percent of drivers make up those with out-of-state plates, the state is missing out on as much as $30 million each year.
“That doesn’t take into consideration all the other fees that get lost as well,” Chaponis says, “the state’s losing registration renewal and emission fees, parking tickets go uncollected, Connecticut businesses are losing out as well, some of these vehicles are purchasing their insurance from Maine, because it’s cheaper, taking business away from Connecticut insurance agents,” he said in transportation committee testimony.
Despite a law against out-of-state plates, enforcement has been a consistent problem. “Enforcing motor vehicle registration laws are kind of at the bottom of the list [for law enforcement],” points out Andrew Schilkowski who works for Municipal Tax Services, a private company that works with municipalities to recover delinquent motor vehicle tax revenue.
“It’s kind of crazy that we have this massive problem that could generate millions of dollars for the state and they’re just overlooking it,” said Jennifer Lineaweaver, the Stonington tax assessor. “If they [the police] could enforce it, that would be more effective than something an assessor could do,” she added.
Motor vehicle registration was first required by Connecticut in 1903. Just over two decades later, according to a study from 1934, tax evasion was already a problem. “Perhaps the most important cause of collection trouble, however, is the practice of owners in registering motor vehicles as residents of town’s other than those of residence at the time taxes are due. This may be done with intent to evade the tax or by inadvertence,” the report stated.
By 1940, as a means to address problematic areas of motor vehicle tax collection, the annual state assessors went on record “favoring the collection of motor vehicle taxes by the State Motor Vehicle Department,” according to a report from the Connecticut Association for Assessing Officers (CAOO). Centralizing the collection of taxes with a standardized taxation rate across the state with reimbursements to each municipality has been discussed since at least 1917, but something the state has rarely engaged in. Even then, back in 1940, the state bypassed the state assessors’ recommendation and continued to let each municipality handle their own collection.
In 1980, the Stonington Assessor, Francis Callahan wrote about taxpayers finding loopholes to Connecticut law around vehicle taxation, specifically within military circles: “Service personnel who own real estate in Connecticut, plan to retire and make Connecticut their home…will claim residency in another State in order to avoid payment of personal property and motor vehicle taxes.”
In New London, shopping for lower tax rates in the neighboring municipality was an issue for the town. James Ramos, who became Waterford’s tax assessor in 1985, recounted what he experienced in the CAAO report, “A typical car with a $10,000 assessment in Waterford would pay $80 in motor vehicle taxes. The same vehicle in New London would pay about $800. Many New London taxpayers would register their vehicles at relative’s homes in Waterford to be beneficiaries of the lower mill rate.”
A few years later, the Connecticut legislature was close to eliminating the motor vehicle tax, Ramos said. In 1988, PriceWaterhouseCoopers drafted a report on the state of motor vehicle taxation in Connecticut and said that local taxation of vehicles was “a major source of tax shifting” and “a significant drain on the resources of local assessors.”
But, Ramos adds, “In 1989, the economy went bad and the legislature decided that they couldn’t afford to lose any source of revenue.”
Furthermore, no action was taken on subsequent bills to eliminate the motor vehicle tax proposed in 2000, 2001 and 2003 according to a legislative report on motor vehicle taxes.
By 2006, Bridgeport, facing millions of unpaid motor vehicle taxes, took strong action and not only started towing cars until taxes were paid, local officials also sent more than 120,000 warrants for people with unpaid car taxes to area banking institutions requesting they freeze the assets of those in arrears.
Ultimately, “It’s a form of taxation that has a lot of inherent. problems,” said Charles Agli, former president of the CAAO, “motor vehicles are a complex item to collect tax on, it’s probably the most difficult to collect.” Cars are not stationary, like real estate, he explained, “Motor vehicles are the most mobile form of property so they can be moved around, registered here and there, and there’s a lot of manipulation to try and beat the system,” he added.
Chaponis has been a tax assessor for decades and of all the ways in which he’s seen people avoid taxes, it’s the residents who take time to research and put effort into registering their car out of state with the myriad of companies that exist to help drivers avoid taxation in their home state that frustrate him most.
“We need some type of teeth where we can start to at least slow this down,” he said in testimony to the Planning and Development Committee last year. “We’re on the front lines where people are walking into our office saying this isn’t fair, they’ve got this, they’re not getting taxed.”
In Montana, where tax rates are low, there are law firms and other companies that advertise vehicle registration within the process of setting up a limited liability company. One firm proclaims, “as a non-resident of Montana, you may be able to avoid paying sales tax, personal property tax and high licensing fees upon the purchase of your new high-performance car, boat, airplane or RV. A simple legal procedure is involved which, in most cases, helps clients save a great deal of money on taxes and licensing fees through creating a Montana LLC.”
In Maine, an LLC is not required to register a vehicle in the state. It’s one of the few states where the law does not require a registrant to prove residency according to Chaponis. Accordingly, the amount of Connecticut residents who register their car in the Pine Tree State has grown over the years. Just last year the state registered 4,745 vehicles with Connecticut addresses. In the planning and development testimony Chaponis provided last year, he points out that, “the state of Maine has seen registrations more than double in the last 5 years with out of state addresses…going from 7,500 to 17,000.”
For all the drivers who’ve moved to Connecticut, but fail to register, there’s no way for the DMV to track that number, “In terms of knowing who moves into our state, there’s no repository,” says Shaun Formica, Director of Communications for Connecticut’s DMV.
Chaponis, who has been addressing this problem since the 1990s is recognized by his peers as one of the most knowledgeable people working on this issue. “He’s the living wonk on all of this stuff,” according to Randall Collins, the advocacy manager at the Connecticut Conference of Municipalities (CCM).
Chaponis’ first assessor job was in New Jersey in 1988, until he returned to Connecticut and became the Colchester tax assessor in 1992. He is also the legislative chairman for CAAO.
“I just take it really seriously,” he says about his strong work ethic and his eye for ensuring equity in taxation. “You’re either part of the problem or part of the solution,” he adds. He’s been a union steward for 30 years and in that time he’s never filed a grievance, “we’ve always worked things out,” which could explain his dedication to working on this issue.
Chaponis still has a letter dated 1996 from the DMV informing him of the drivers in his municipality that were non-compliant in registering their car. “Years ago when the DMV had a registration compliance unit that was working on it, that’s how these things were getting addressed,” he said in the planning and development committee testimony. The compliance unit would write to an assessor, informing them they had received information on a motor vehicle with out-of-state plates that were found within their town and include the letter they mailed to the driver. They would also inform the assessor that the local police department could act on the information and issue an infraction complaint.
While the DMV still has a registration compliance unit, it is no longer engaged in tracking motor vehicles with out-of-state plates, as it once did. “This is not a DMV enforcement issue; there isn’t a centralized database or way for DMV to enforce the rules for transferring your registration or driver’s license once establishing residency in Connecticut,” the DMV’s director of communications, Shaun Formica clarified.
These days, if municipalities want to recover this tax revenue, it usually falls upon the assessors, or the municipality can hire an outside company. “The amount of work that’s going into this is taking us away from looking at personal property declarations, and doing audits and finding real estate,” Chaponis said in his testimony.
Over the years, Chaponis has gotten creative in finding ways to track Colchester residents who don’t pay tax on their cars – he once hired a criminal justice student whose job it was to collect out-of-state plate numbers, take pictures and document the location of their car over time, run various background checks to verify residence data and keep track of it all to provide the necessary information for which Chaponis could take action.
In one recent state-wide initiative to address the problem of out-of-state plates, the legislature approved the formation of a task force meant to study the issue and put forth recommendations. In public act 19-119, Chaponis explains in the planning and development committee testimony, “it put law enforcement, DMV officials and assessors all on the task force to sit down and try and talk about the problem and create a mechanism that maybe would help further, but unfortunately all of the appointments were not made and the task force never met and missed their deadline to turn out a report.”
A similar act, 21-106, also proposed a task force, but again, it was never fully staffed and couldn’t move forward.
In one of the more recent pushes to eliminate motor vehicle taxes, then Governor M. Jodi Rell proposed a measure in 2007 that would have replaced the revenue with money generated by Connecticut’s casinos. Later iterations of the bill evolved following criticism and concern over the state’s ability to reimburse towns for their share of tax revenue. A revised plan called for taxation for cars worth more than $30,000.
“You can own any make, model, or year car and if the fair market value is $30,000 or less the tax is eliminated,” Governor Rell said in a press release from 2007.
Ultimately, the tax wasn’t eliminated, due to pushback from local officials who weren’t convinced the state would be able to maintain consistency in disbursing revenue to each municipality in times of budgetary constraint. “It’s happened time and time again, where there’s a property tax exemption and then the state intends to fund it…then during difficult budgetary years, all of a sudden those reimbursements are depleted and they disappear,” says Betsy Gara, executive director of the Connecticut Council of Small Towns (COST).
“No one likes car taxes, we get it,” says Randall Collins of CCM. “Municipalities are over-reliant on property taxes, it’s one of the few revenues we have so when we talk about changes to car taxes, it’s a billion in local revenue so it’s a very sensitive topic to discuss.” If the taxes were eliminated, Collins says, it would just fall to homeowners and commercial businesses, so, the state, “tinkers with it, but they don’t,” he adds, highlighting the delicate navigation required of lawmakers.
Gara represents the smaller municipalities in the state which see property taxes as a big concern. “Towns heavily rely on property taxes to fund the delivery of critical services including education, public safety and public health and it’s frustrating when people skip out on paying their taxes by not registering their vehicles or register them out of state,” Gara says.
The regionalization of services is one way forward that Collins and others have discussed as a means to consolidate expenses across towns to bring the tax burden down. Last year, lawmakers approved an amendment that would make regionalization easier for municipalities to adopt. “We’ve issued report after report, I’ve got a whole shelf of them, that talk about different ideas of how to address the property tax burden,” Collins said. In 2017, the CCM issued a report titled This Report Is Different. “It recommended changes on reducing reliance on the property tax, a revenue diversification, but it also talked about additional regionalization of services to promote efficiencies,” Collins said.
Ultimately this gridlock, “comes up every year,” he says. “At a minimum, do the task force,” Collins urged.
Perhaps one of the biggest boons to delivering delinquent tax revenue back to municipalities is Municipal Tax Services (MTS). It was founded in 2005 by Carl DeProfio, a retired detective from the Connecticut State Police, and its sole mission is to investigate tax assessment discrepancies within the state. To date, they’ve been contracted by Bethel, Bridgeport, Danbury, Hamden, Hartford, New Haven, New Milford, North Haven, Stamford, Stratford, West Haven and Waterbury. Currently, they’re running investigations in Bethel, New Milford, Stamford and Waterbury. In total, they’ve identified over 69,000 vehicles for taxation which combined, have been assessed at over $783 million.
In what has been one of their biggest successes for recovering revenue – the town of Waterbury has collected over a million in taxes from residents who failed to register their car thanks to the data MTS collected.
The actual data collection process is intensive. Agents will drive each and every street of a municipality, multiple times, recording each plate that’s observed through SecureWatch24 (a patented dashboard-mounted camera system), capturing time, date, and GPS location of the car. Infrared lenses capture data during nighttime hours. For long driveways and cars parked far from eyeshot, the agent will use binoculars and enter data manually. Next, they’ll verify the data that’s collected, compare it to the motor vehicle grand list, property records from the municipality, voting records, DMV records from Connecticut and New York and other databases to determine if there is a tie to that municipality. In the event there is no tie, they’ll wait and observe whether they see the car over a period of time, “The owner may not live there, maybe it’s someone at school, a kid driving mom’s car,” Schilkowski points out. If there’s a match, a letter of inquiry goes out to the registrant indicating a tax liability to the city.
When that tax is finally paid, MTS gets paid. “The income we receive is from the taxes and interest that is collected on the motor vehicles that we identify,” Schilkowski says. MTS takes a percentage of what’s collected, which varies depending on the amount of work required. “We stress with everyone, the only [up-front] costs that are associated with our services is mailing out the tax bills, mailing out letters from the assessor’s office…but that’s it,” adds Schilkowski.
While MTS has been able to deliver sizable sums of revenue for towns across the state, their contracts last only as long as the local administration views them as providing a valuable service. The momentum to drive a municipality to reach out to MTS can come from residents when, “there’s enough of them to cause a ruckus essentially – then that’s when the administration will look into our services. Other than that it’s revenue based,” Schilkowski says, when towns come up short in their budget.
For example, in 2015 when Connecticut enacted a cap of 29 mills to decrease the motor vehicle tax burden on residents, it didn’t last long. For municipalities whose mill rates were higher than the cap, the state was due to reimburse them for the remainder, but just one year later, the state raised the mill rate to 37 to deal with a $1 billion budget deficit.
The DMV is central in being a participant in finding better ways to recover lost tax revenue. Whether or not there will be funding to return the Registration Compliance Unit to its former capacity in which it received information on motor vehicles with out-of-state plates and informed local assessors remains to be seen.
“I can’t speak to the capacity of the DMV and their ability to do this, but I think…if we had one person…that would do this [track delinquent plates]….when you look at the cost-benefit how many vehicles are you going to capture, with those registration fees, the emission fees, that are associated with these registrations, it generates X number of dollars, does that offset the loss of increased personnel?” Randy Collins from CCM asks. “That idea is sitting down and bringing all the stakeholders together to understand what are the solutions and what are the costs,” he adds.
At the same time, could MTS bid for a state-wide contract and provide their services to the entire state? “In my personal opinion, it wouldn’t be impossible,” Schilkowski says. “It would just be a matter of expanding the workforce,” he adds. “The only issue would be how the state would recover any money from their efforts,” he continues. While the taxes they recover would go to local municipalities, there’s still a question of how much the state’s cut might be.
Ultimately, it seems one solution many officials agree on is increasing the variety of state and local funding streams. “We need to look at ways of diversifying the revenue source so that towns aren’t completely dependent on the property tax to fund local services, and part of that means additional state aid, but also exploring opportunities to provide municipalities with other mechanisms for raising revenue,” asserts COST’s Betsy Gara.
October 16, 2022 @ 7:47 am
“For long driveways and cars parked far from eyeshot, the agent will use binoculars and enter data manually.”
That is clearly an invasion of privacy. Amazing the lengths these tax and spend people would go to.
October 16, 2022 @ 9:16 am
People buy their cars and pay a sales tax. It is outrageous and extortion to pay car taxes every year. This whole article is nothing more than greed on the part of the state that maliciously goes after mostly taxpayers who cannot catch a break in this state. When will there be an article on how taxpayers are cash piñatas for deadbeats and illegals who are bleeding us dry? If we did the state of illegals, who, according to an old Yankee report, for every one dollar they put in the economy, access 7 in every possible permutation of “welfare”. How about investigate the fraud of these state “welfare” programs that provide housing and the system is abused by people who clog up the units with more friends and relatives who are never reported? They have schemes by which they send money back and forth to their former country and it’s a big theft ring. The seniors who worked their whole lives, and are bled to death by taxes in this state are treated like garbage. You call up LaMont or any state representative and complain about the illegals and they all but hang up on you. Where’s this story in the queue?
January 25, 2023 @ 9:50 pm
100%!!
October 16, 2022 @ 4:28 pm
People purchase a house and pay a sale tax (called a conveyance tax) yet they still pay a property tax every year to the local municipality. Saying you pay a sales tax on your car makes makes it outrageous to pay a property tax on your car each year makes no sense. The bottom line is: If Connecticut is going to have a property tax on motor vehicles; it needs to fair and equitable. You don’t have to drive far anywhere in this state before you see people dropping off kids at school with Maine, Florida, and NY plates. These are not people who “just moved to CT” but people who are avoiding the taxation. BTW… for everyone who successfully avoids the tax, you and I pay more to make up the difference. I appreciate the curtain being pulled up and the light be shined on tax evaders. Its a shame that the Governor can pour 100 Million into tax releif but cannot find 50K for an employee at DMV to address this growing issue.
October 17, 2022 @ 11:54 am
The motor vehicle tax is small potatoes. The property tax is the real problem. Seniors, who can pay their MV tax cannot afford property taxes. Why should a house in CT and a similar s.f. home in FL pay such a differential in property taxes? The same comparison is apropos in TN and the Carolinas.
October 19, 2022 @ 3:52 pm
The real problem is that Connecticut is a high tax State that is inhospitable to business and does everything it can to drive out businesses and higher income individuals. Connecticut spending is and has been out of control. State Unions elect Democrats and then negotiate contracts with them. The average Connecticut State employee makes $10000/year more than the average Massachusetts employee. Connecticut has the highest bonded indebtedness per capital in the United States. I could go on and on.
Larry Jean
November 7, 2022 @ 6:01 am
AND there is no law requiring any Connecticut municipality to require low bid when soliciting competitive bids for their goods and services. The town/city can tilt the table any way they want to obtain their purchasing outcome. Bid solicitations aimed at vendors with odd requirements limiting competition are standard practice. While consulting in the law enforcement equipment business my company was able to discover hundreds of thousands in overpayments for equipment purchased for the State cruisers. Most of the law enforcement gear is purchased as a discount off a published retail list price, substantially higher discounts are available in other States. Connecticut has been “overpaying” for years. Our analysis shows $1,777 per cruiser could be saved by buying cruiser gear, on contract, in other States. SO, the story above is interesting. The State and municipal procurement habits might also need a tweak. Laws requiring products of equal quality and availability to be allowed to be purchased would save the State millions. It can be demonstrated Connecticut has overpaid millions because, we believe, they purchase by brand not allowing competition to take place. Also, the State has 50-year contracts for some products like 2-way radios or law enforcement management software. Taxes are not high in Connecticut without reason – the purchasing discipline appears horrid.
November 29, 2022 @ 9:27 am
I think there are a lot of different things to consider.
1) if you have to pay taxes on your vehicle you don’t own it, your renting it from the state. The same as your home.
2) Our state and Federal tax rates should be flipped. If the states got together and held to constitution convention and capped the federal tax rate at 10% and made the state tax rate a flat 25% our state would have less issues overall.
3) I am torn about this. I don’t like the car tax. I think it is egregious. I agree with other comments regarding CT not being business friendly. Additionally, we should have a real audit of state budget, pensions should be capped, etc. CT should be run like a business and it is not. Term limits for our legislators would help solve this problem and kicking lobbyists out of our state house. Additionally, over 80+ million is spent lobbying every year, we could just tax the lobbyists….
I think there is more to say about this issue but this is a start.
January 15, 2023 @ 10:45 am
Can wait to pay the increase this year.
There is no way to dispute the amount required.
This state is killing the taxpayers with a thousand different taxes and fees.
So happy to be leaving soon
January 12, 2023 @ 11:02 pm
Mansfield charged me a full tax on a 25 year old car for years. I only found out in an article that those cars have a exemption and I demanded a refund for 6 years of false taxation. Car registered in CT. No refund. Not registering any cars in CT.
January 15, 2023 @ 10:27 am
Can you legitimately register your vehicle in another state if you own property there?
January 16, 2023 @ 11:14 am
The former governor’s name is M. Jodi Rell, not Jody.
January 20, 2023 @ 12:50 pm
Since moving back to CT a few years ago from the Midwest where there was no vehicle tax, I have been puzzled by how many people I see driving expensive new vehicles (and registering them in CT) in the face of a clear tax incentive not to. The widespread evasion of the vehicle tax described in the article explains a lot of that. I suspect also in a lot of cases persons are registering their personal vehicles as commercial and writing off the expense. The exorbitant level of vehicle taxation obviously drives both forms of evasion. What is the rate of compliance – what percent of CT vehicle owners are not paying their vehicle tax? CT’s vehicle tax definitely has a fairness issue in who is bearing the burden, and little sense in terms of its purpose. No one likes taxes, but from a public policy perspective, taxes are necessary to raise revenue, and they inevitably shape behavior. Let’s leave aside the high level of spending (and what and who we are directing it to) — another big set off issues — and assume we need X amount of revenue. Depending on our policy goals for the state and what behavior we want to promote/discourage, some forms of taxing make more sense than others. For Connecticut, the income tax seems to have driven a lot of taxpayers to establish residency in Florida and elsewhere. Property and sales taxes would have to go up a lot to replace that revenue, which is hard to even imagine. Driving creates costs to the state and the inhabitants in the form of traffic, pollution, and road maintenance, whereas persons opting for newer, more luxurious vehicles does little harm to the public and even brings some benefits. So raising the tax on fuel while reducing then eliminating the tax on vehicles would make sense, leaving a relatively small user fee to cover licensing and registration administration. Everyone loves to hate the gas tax, but it actually makes sense, and it is easy to administer.