PROVIDENCE, R.I. (WPRI) – House Speaker Nicholas Mattiello on Tuesday became the latest Rhode Island leader to promise he’ll scale back the car tax. But will his pledge have more staying power than previous ones?
Rhode Islanders don’t need particularly long memories to remember the fanfare with which the Democratic-controlled General Assembly passed the Motor Vehicle and Trailer Excise Tax Elimination Act of 1998. The law froze municipal property tax rates on cars and trucks at their 1997-98 level, and set a schedule to replace the local revenue from the tax with state aid, with a total phaseout by 2005-06. They even formed a “permanent oversight commission” to scrutinize the effort. (It’s no longer active.)
“We have targeted elimination of the vehicle excise tax for a number of reasons,” Tony Pires, then the House Finance Committee chairman, said at the time. “It is a regressive tax that is higher in Rhode Island than in many other states. It also encourages tax avoidance with people registering their vehicles to addresses in municipalities that have lower tax rates, and it’s also expensive to administer.”
“By eliminating this tax we not only get rid of a number of problems, but we also give substantial tax relief to probably the largest portion of Rhode Island’s population, namely those who own or lease a car or truck,” Pires added.
But as almost every Rhode Islander who owns a vehicle knows, the change didn’t stick.
First lawmakers voted in 2000 to delay the phase out by one extra year, until 2006-07, after then-Republican Gov. Lincoln Almond expressed concerns about the cost. Then in 2002 they scaled back the state’s commitment, to only cover the tax payment on a car’s assessed value up to $4,500, rather than phase out the tax entirely. (Almond had proposed freezing the exemption even lower, at $2,500 or $3,500.)
In 2006, however, lawmakers raised the exemption to $6,000, all but wiping out the car tax for most drivers and making up the difference by sending cities and towns money from slot machines at Twin River (then Lincoln Park).
Then the Great Recession hit. In 2010, after multiple years of plunging state revenue, Republican Gov. Don Carcieri and Democratic legislative leaders – including Mattiello, then the majority leader – agreed to slash the amount of car taxes covered by state aid from $6,000 to $500 in assessed value. (Cities and towns could set the exemption higher, but they wouldn’t get any state aid to cover the foregone revenue.)
The impact was significant. In one year, the amount of state revenue devoted to offsetting the car tax dropped from $117 million to $10 million. (That remains the status quo in the current budget.) Many taxpayers were suddenly hit with large car tax bills, particularly in cities and towns that set their exemption at the $500 minimum.
Among those who spoke out against the move was then-Lt. Gov. Elizabeth Roberts, a Democrat who had been a state senator and who was up for re-election that year. Calling the car tax “the most regressive tax in Rhode Island history,” she said: “It is shocking that in 2010 Rhode Islanders will again face paying a tax that they can afford even less in this tenuous economic climate.” But Carcieri and lawmakers said they had no other good options to deal with the recession.
The total amount of car tax depends on two factors: the value of the vehicle, and the local tax rate per $1,000 of value. For example, if a car is worth $4,000 and a town with a $500 exemption has a tax rate of $20 per $1,000, the tax bill would be $70. (The value of the car is set by the R.I. Vehicle Value Commission.)
As of 2014, the most recent year for which data is available, Rhode Island’s 39 cities and towns levied a combined $215 million in taxes on cars and trucks, according to the R.I. Division of Municipal Finance. The total amounts range from $35 million in Providence to $146,000 on Block Island. The rates per $1,000 range from $60 in Providence to $9.75 on Block Island, and the exemptions vary from the $500 minimum in 16 communities to $6,000 in seven. (Three communities – Portsmouth, Richmond and Scituate – charge less than the full retail value.)
Other New England states also levy a tax on cars, but they handle it differently from Rhode Island, according to a 2014 Providence City Council report. For example, Massachusetts had no exemption but charged a flat rate of $25 per $1,000 statewide, and doesn’t use market values to determine how much a car is worth. New Hampshire and Maine also set statewide rates, which decrease for older cars. Connecticut’s car tax system is similar to Rhode Island’s, according to the report.
While Mattiello was emphatic Tuesday that he will approve a “meaningful” cut in car taxes next year, should he win re-election, he refused to provide estimates on how much state money he’d be willing to pony up for the effort or what the cut would look like. Gov. Gina Raimondo, who has expressed vague support for cutting car taxes but never offered her own plan, said through a spokesman she wants to see further details.
Until Tuesday, Mattiello himself has sounded lukewarm about cutting the car tax, despite frequent calls from rank-and-file lawmakers to do so, and his GOP opponent Steven Frias noted he didn’t touch the issue during his first three years as speaker. But Mattiello insisted his announcement Tuesday was a firm commitment spurred by his conversations with voters in his Western Cranston district.
“I would not be standing up here and telling the citizens of the city of Cranston and the state of Rhode Island that they’re going to get relief on their car taxes if I did not 100% plan to deliver on that,” he declared.