Mattiello’s Car Tax Proposal Draws Mostly Favorable Reviews

by Ian Donnis

House Speaker Nicholas Mattiello’s proposal to eliminate the car tax over six years attracted mostly positive reviews during an initial House Finance Committee hearing Tuesday night.

But critics raised a series of concerns, ranging from how the phase out will not help Rhode Islanders who don’t own cars to a lack of specifics about how the state will come up with the money to compensate cities and towns $220 million a year.

Central Falls Mayor James Diossa and Providence Mayor Jorge Elorza said phasing out the car tax will offer much-needed relief to residents of those cites.

“In year one, 41 percent of all currently taxed cars in Central Falls will be removed from the tax rolls,” Diossa said. “Across the state, 20 percent of all taxed cars, or over 150,000 cars, will be removed from the tax rolls.”

Representatives of the Greater Providence Chamber of Commerce, the Rhode Island League of Cities and Towns, and the Rhode Island Public Expenditure Council spoke in support of Mattiello’s phase-out plan.

But critics like Warwick car tax activist Rob Cote pointed to a lack of details about how the state will come up with the money to compensate cities and towns for an eventual $220 million in lost revenue each year.

In unveiling his car tax plan last week, Mattiello said he expects economic growth and leaner government to make up for the elimination of car tax revenue.

“At best, it’s speculative,” responded Cote. “And let’s face it, legislators come and go. Next year, there might be someone else who says, ‘hey, we can’t afford this, we’ve done the analysis and it’s going to go away,’ and everybody who signed on this bill is going to have egg on their face. It’s not good.”

Mattiello’s plan proposes using a series of approaches to eliminate the car tax by 2014. Those include cutting the percentage of the value of a car that can be taxed, raising exemptions, capping the car tax rate, and excluding cars that are at least 15 years old.

Doug Hall, director of economic and fiscal policy at the Economic Progress Institute, sounded cautious notes about the car tax phase out. In part, he said the elimination will benefit low-income residents more initially, but then accrue more to the advantage of “wealthy communities and the communities that have more wealthy people within them.”

Hall also noted proposed phase out involves a large amount of money — $818 million during the course of the phase-in — that could go to other uses.

“I’m sure that there’s lots of folks around this room who could think of much more effective ways to stimulate the Rhode Island economy, or better ways to provide more targeted tax relief, with that kind of money,” Hall said.

House lawmakers overwhelmingly support Mattiello’s proposal. A companion bill in the state Senate is due to get an initial hearing Thursday.