House Speaker Nicholas Mattiello on Tuesday outlined his proposal to eliminate the car tax over six years, asserting that “economic growth and leaner government” will enable the state to make up for an eventual loss of $220 million in revenue to cities and towns each year.
Mattiello said the state budget for the fiscal year beginning July 1 will compensate municipalities for an initial $26 million in reduced car tax revenue. He told reporters that financial challenges — including a current $134 million state deficit — will not block the phaseout of the car tax.
“We have a significant deficit which we’re going to look at comprehensively and as we look at it comprehensively, we’re going to work in the $26 million,” Mattiello said during a briefing in his office. “This is the people’s agenda, I believe it’s the people’s priority, and we get the people’s priority accomplished.”
Mattiello’s proposal was introduced as a bill shortly after his briefing, and it may be the subject of a House Finance Committee hearing as soon as next Thursday.
Under Mattiello’s plan, the portion of a car’s value that cities and towns are allowed to tax would be reduced over a six-year period, dropping from 100 percent to 95 percent in the fiscal year starting July 1, and an additional five points each year through 2023, the envisioned “final year” of the car tax.
The proposal will make more of a vehicle’s value exempt from taxation, increasing the minimum exemption in fiscal 2018 from $500 to $1,000. That exemption would grow by $1,000 each year through 2023. Mattiello’s plan will also cap the rate that communities can charge for the car tax, from $60 of assessed value in 2018 to $20 in 2023.
Although he declined to identify any programs that will be cut, Mattiello said it won’t be difficult for the state to come up with the money to compensate cities and towns for their lost car tax revenue.Mattiello said it won’t be difficult for the state to come up with the money to compensate cities and towns for their lost car tax revenue.
“If you prioritize this is not the most difficult thing in the world to do,” the speaker said. “It depends on what level of priority you want to put to it. I”m giving it a significant priority, because the people are giving it a significant priority. So we will get it done on the people’s behalf.”
The state has tried eliminating the car tax before. It began a phaseout in 1998, but backtracked when the economy worsened.
Mattiello said he had not spoken with Governor Gina Raimondo about his car tax plan in several weeks. An aide to the speaker said the governor’s staff was not involved in formulating the proposal, although officials with the state Department of Revenue were part of the process.
In the past, Raimondo has questioned whether the state can afford to eliminate the car tax. After Mattiello offered his proposal, she issued this statement:
“I credit Speaker Mattiello for tackling an issue as big as the car tax and wholeheartedly agree that Rhode Islanders deserve a car tax cut. His $220 million plan deserves a full public vetting, and I look forward to working with him to put money back in Rhode Islander’s pockets.”
Senate President Dominick Ruggerio said, “I am supportive of efforts to provide car tax relief. The communities I represent, Providence and North Providence, have among the highest auto excise tax rates in the state. It is my hope that any proposal be affordable and sustainable. I have not yet seen the speaker’s proposal but I anticipate that it will be thoroughly reviewed by the Senate Finance Committee.”
House Minority Leader Patricia Morgan (R-West Warwick) has been supportive of the concept of eliminating the car tax.
But state Republican Chairman Brandon Bell said he considers the proposal an act of political expediency: “This is the ‘save my political ass tax cut plan,’ Bell said. “Apparently the only way to get the Democrats to enact real tax cuts is to scare them with a very strong and principled Republican opponent. Permanent tax cuts are realistic when accompanied by permanent spending cuts. I’m surprised that on May 30 the Speaker doesn’t have that planned out. Along with much-needed state spending cuts, our cities and towns needs to tighten their spending to offset their lost revenue from this regressive tax. I give Speaker Mattiello credit for following through on his campaign promise which is much more than any of us can say about Governor Raimondo’s broken campaign promise for an independent probe into 38 Studios.”
A news release accompanying Mattiello’s car tax plan said he was “delivering upon a promise he made at the start of this legislative session.”
Yet the speaker first cited an intention to eliminate the car tax in the face of a stiff re-election challenge last year by Cranston Republican Steven Frias. Mattiello won a narrow victory over Frias.
In a statement, Frias took some of the credit for the speaker’s proposal.
“I’m happy that my efforts in 2016 helped force Speaker Mattiello to finally listen to his constituents and propose some significant tax relief,” Frias said. “Unfortunately, Mattiello’s car tax plan will likely lead to only temporary tax relief while adding to the state’s long-term structural budget deficit.”
“To ensure permanent tax cuts, there must be real spending cuts,” Frias continued. “Permanent car tax relief will only come about through a combination of state and local spending cuts. Mattiello has failed to propose any spending cuts to fund his car tax relief plan. Rhode Island politicians tried Mattiello’s approach to car tax relief less than two decades ago and failed.”
Asked how he could assure citizens that he’ll be in office to pursue the car tax elimination, Mattiello said, “Last year was a unique election cycle. That’s not going to be repeated next time. I’m very confident of that. And I guess that’s the people’s choice. They could want me to see this through or not. It’s always the people’s choice. They will always make the determination as to who they want up here and what their priorities are and I respect that. But that is not about a campaign promise. This is doing what the people want us to do.”
