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Advisory: Senator Rahman Welcomes Public Testimony on Bill to Phase Out the Car Tax
On Monday, April 1, the Finance, Revenue and Bonding Committee will hear public testimony on Senate Bill 450, a proposal to phase out the local motor vehicle property tax over the course of five years, while increasing municipal assessment ratios on real property to make up the lost revenue.
The legislation, which will be vetted during the public hearing beginning at 10 a.m. in room 2E of the Legislative Office Building, follows the work of the Motor Vehicle Property Tax Taskforce, a working group chaired by Sen. MD Rahman, D-Manchester.
Senator Rahman, who is a member of the Finance Committee, has been a staunch advocate of repealing Connecticut’s car tax, which is widely considered to be one of the most unpopular and regressive taxes on the books due in part to its disparate impact depending on where taxpayers reside.
“Nearly everyone in Connecticut grumbles about our unfair motor vehicle property tax, but it does not have to be this way,” Senator Rahman said. “This bill charts a five-year course toward repealing this complicated tax while keeping town budgets whole.”
The proposal would begin to take effect during the assessment year that begins this October, when it would exempt the first $5,000 of a motor vehicle’s assessed value. This exemption would gradually increase over the subsequent four years from a $9,000 assessment exemption in 2025, to $14,000 in 2026, $21,000 in 2027, until motor vehicles are completely exempt from property taxes after Oct. 1, 2028.
Each assessment exemption increase covers about 20% of Connecticut’s total number of registered motor vehicles, resulting in about one fifth of the state’s cars and trucks becoming fully exempt during each year of the proposed timeline.
Lost municipal revenue resulting from these exemptions would be offset under Senate Bill 450 by a gradual increase in the real property assessment ratio. Currently, state law requires towns and cities to assess property at 70% of its actual value.
Senate Bill 450 would increase that percentage incrementally to 75% for the assessment year beginning this October. The percentage would continue to increase over the subsequent four years to 80% in 2025, 83% in 2026, 87% in 2027, and 90% after October 2028.
“This bill transitions our state away from a tax that imposes unfair financial burdens on residents in some of our communities and catches many new Connecticut residents by surprise,” Senator Rahman said. “When I first moved here from Bangladesh, 25 years ago, I was caught off-guard when I learned about the car tax. I had not budgeted for this cost and the additional expense put purchasing a car out of reach for me. It is time to apply practical measures to ensure our tax system’s fairness, regardless of our town of residence.”
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