Summary of Rhode Island’s Car Tax
The Motor Vehicle Tax (commonly known as the “Car Tax”) is a property tax collected by each Rhode Island municipality based on the value of each motor vehicle owned. There are three components that determine how much each individual car is taxed: valuation, tax rate and exemption.
The valuation of the motor vehicle is set by the Vehicle Value Commission, a state-wide body appointed by the Governor. In all but three Rhode Island towns (Portsmouth, Richmond and Scituate) each car of a certain year, make, and model are assigned the same value. The Commission relies on the National Automobile Dealers Association (NADA) book value to set the rate, a practice that has been criticized since the valuation ignores both mileage on the vehicle, and the condition of the vehicle. Both these omissions tend to disadvantage low-income Rhode Islanders less able to own and operate low-mileage vehicles in top condition. Changing the valuation (as the Governor’s proposal does) disproportionately helps owners of older, less valuable vehicles, including many lower-income residents.
The tax rate is determined by each municipality. In FY2017, the rate ranges from $9.75 per $1,000 value of the car in New Shoreham to $60.00 per $1,000 in Providence, evident in Figure 1.
Rhode Island’s car tax structure — particularly the exemption that excludes some low value vehicles from any motor vehicle tax — is unique in New England. In neighboring Massachusetts, there is a statewide rate of $25 per thousand dollars of assessed value (which is determined based on a declining scale as a percentage of the model year list price of the vehicle). Like Rhode Island, neighboring Connecticut allows each town to set its own rates. In both Maine and New Hampshire, both the rate and the valuation decline with the vehicle’s age.