R.I. lawmakers hear pros, cons on car-tax repeal

Tax relief is touted, but at what cost, some ask

By Katherine Gregg
Journal Political Writer

PROVIDENCE, R.I. — Over the course of an hour-and-a-half at the State House Tuesday night, lawmakers heard again and again how much the repeal of Rhode Island’s much-hated car tax would help taxpayers, while at the same time making the state more affordable — and attractive — to business.

But they also heard critics of House Speaker Nicholas Mattiello’s car-tax repeal legislation say the $221 million that the phased-in repeal would eventually cost the state in annual revenue could be better spent, and that making the promise of such a big tax cut — without identifying where the money will come from — is “irresponsible.”

In response to media queries, Mattiello has cited future revenue-growth in an improving state economy and unspecified savings from leaner, more efficient government as the ways he expects the state to close a projected $134-million budget hole and provide the first round of car-tax reimbursements.

“It’s another $26 million we have to find [for the first year],″ he said during an appearance of WPRI-TV’s “Newsmakers” last week. “But if it’s a request of the people and it’s something that they really want, I think that is one of the most important things in the budget.”

The mayors of Providence and Central Falls made pleas to the House Finance Committee to eliminate the tax to give their residents a break, especially those who drive older cars.

“In Year One, 41 percent of all currently taxed cars in Central Falls will be removed from the tax rolls. That means 3,563 out of 8,735 cars…put[ting] much-needed [money] back into the pockets of low-income and middle-class Rhode Islanders who will turn around and reinvest this money back into our local economy,″ Central Falls Mayor James Diossa told the lawmakers.

The Rhode Island Lumber and Building Materials Dealers Associations — whose members rely on cars and trucks to deliver their goods to their customers also gave the proposed six-year phaseout an enthusiastic thumbs-up.

“Nationally, 24 states do not tax cars, and among the states that do tax cars, Rhode Island has the highest taxes,″ the trade group told the lawmakers. “A highest tax in the nation vehicle tax does not help attract businesses or residents…and is an obstacle to encouraging economic growth and prosperity.”

On the other side of the debate, Douglas J. Hall, the director of fiscal policy for The Economic Progress Institute, argued there are much more effective ways to stimulate the economy than giving tax relief to people with expensive cars — who do not need it — while people who do not own a vehicle get nothing.

“The fiscal hit that we are looking at here is enormous,″ Hall said. “It’s $221 million when fully phased-in. Over the period of time between now and when it was fully phased in, it would cost the state about $818 million….I am sure that there’s lots of folks around this room that can 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.”

Questioning where the lawmakers would find all of this money to reimburse the cities and towns for their lost car-tax revenue, he said: “If we were to have cuts, I think it’s really irresponsible to proceed…without being able to identify exactly where…The public deserves to know, the General Assembly deserves to know, where those cuts would be coming from.”