Mattiello plan ends car tax right away for 41% in Central Falls, 5% in E. Greenwich

PROVIDENCE, R.I. (WPRI) – Critics of House Speaker Nicholas Mattiello’s proposal to replace the municipal car tax with state revenue often point out that the $221-million policy will be a relative windfall for residents of select communities.

A set of spreadsheets released by the speaker’s office Tuesday night show just how much the impact will vary.

In Central Falls, for example, 41% of all currently taxed cars – 3,563 out of 8,735 – will come off the rolls immediately if the Mattiello plan passes, thanks to a provision eliminating the tax on all cars more than 15 years old starting July 1. Also seeing big first-year reductions in their car tax rolls would be New Shoreham (34%), Providence (31%), Pawtucket (30%) and Woonsocket (28%).

Statewide, the policy would take about 20% of all cars – 152,520 out of 746,965 – off the tax rolls in its first year. The change in Mattiello’s hometown of Cranston – where the speaker said voters’ vocal complaints convinced him to prioritize the issue – would match the state average.

Under Mattiello’s plan, the car tax would be phased out over the next six years, and the state would reimburse cities and towns for all the money they currently collect from it – at an eventual cost of $221 million in 2023-24, the first fiscal year when the tax will be eliminated entirely.

It would take time, however, for every driver to feel the impact. As late as 2022-23, the last year before the Mattiello plan eliminates the tax, nearly half of all cars statewide would still be paying the tax: 339,844 out of 746,965.

In wealthy East Greenwich, for example, 95% of cars would still be on the tax rolls in the first year of the plan and 80% would still be there in the last year before the car tax disappears; the town’s state reimbursement would then nearly double, from $1.2 million in the tax’s last year to $2.3 million once it’s gone.

State Sen. Lou DiPalma, a Middletown Democrat who serves on the Senate Finance Committee, said he supports the general idea of eliminating the car tax. But he noted that residents of towns such as his pay a lower car tax than those in cities such as Providence, and therefore won’t save much under the Mattiello plan.

“The impact of the car tax for them is much different than the impact of the car tax for Providence or another metropolitan area,” DiPalma said.

“In the seven years [of Mattiello’s phaseout plan] and beyond, how are we addressing the parity of reimbursement to cities and towns, which ultimately goes back to residents that pay the car tax, in the light of the differences that exist throughout the state?” he said.

Mattiello has acknowledged the disparate impact of a car tax phaseout, and defended it as the unfortunate outcome of trying to fix a flawed policy. He has also noted that the same general policy was put in place the last time the state tried to repeal the car tax, in 1998.

“Generally you’re going to find that your higher-taxed cities and towns are also the needier cities and towns that have always gotten extra state aid anyway,” Mattiello told reporters Tuesday. “So from an equity standpoint I’m not sure that it’s inequitable, but at the end of the day we allowed the design of a bad car tax system, so in order to do the fair thing we’re just going to have to eliminate it.”

The documents released by the speaker’s office reinforce the findings of a Target 12 analysis in February that showed more than half the state money from phasing out the car tax would go to just six communities: Providence ($32 million), Warwick ($25 million), Cranston ($21 million), Pawtucket ($15 million), East Providence ($10 million) and Johnston ($9.6 million).

Mattiello wants to budget $26 million for the first year of the phaseout, and has said the money will be found in the new state budget currently being finalized despite a $134-million hole that has already opened up in the tax-and-spending plan.

“If you prioritize, this is not the most difficult thing in the world to do,” Mattiello said Tuesday.

But DiPalma expressed concern that the new plan may be vulnerable in the same way the last one was when economic conditions turn south.

“We will have another recession,” he said. “It’s not a case of if, it’s a case of when. … A recession will occur at some point – how will grave will that be?”

DiPalma also said he supports Gov. Gina Raimondo’s tuition plan and would like to see that included in the budget, too. “We want to get both these footballs across the goal line,” he said. “How ugly is it going to be getting them across the goal line?”

According to Mattiello’s spreadsheets, Central Falls residents also come out on top in the first year of his plan if you look at the percentage of the car tax levy covered by the state, though Providence is the leader if you look at the raw amount of money shelled out.

The state would cover 17% of the 2017-18 car tax levy in Central Falls under Mattiello’s plan in year one, paying the city roughly $300,000. The state would also cover 16% of the levy in Pawtucket ($2.4 million) and 15% in North Providence ($1.4 million), Foster ($239,000) and Glocester ($324,000).

On a dollar basis, eight of the state’s 39 communities would receive more than $1 million to offset the car tax just in the first year of the plan. The biggest first-year winner is Providence ($4.2 million), followed by Pawtucket ($2.4 million), Cranston ($2.4 million), Warwick ($2.1 million), North Providence ($1.4 million), Johnston ($1.3 million) and Woonsocket ($1.3 million).

Ted Nesi (tnesi@wpri.com) covers politics and the economy for WPRI.com. He writes Nesi’s Notes on Saturdays and hosts Executive Suite. Follow him on Twitter and Facebook

An earlier version of this story described Senator DiPalma as a Portsmouth resident; he is a Middletown resident.