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Malloy’s plan to nix Connecticut’s motor vehicle tax may be costly

state-capitol

A break for taxpayers on one hand may result in an increase on the other.

Gov. Dannel P. Malloy’s proposed biennial budget includes eliminating the motor vehicle tax, but that would result in the loss of a big chunk of revenue for the town — more than $3 million.

In his budget, the governor proposes to exempt from local property taxes the first $20,000 of a vehicle’s assessed value. That means owners of vehicles with market values under $28,500 would pay no property taxes at all on theses vehicles, the governor said in his budget presentation.

The proposal would impact more nearly 83% of motor vehicles in town, whether they are owned by residents or businesses.

According to an analysis done by Assessor David Lisowski, based on the 2011 grand list, there were 13,382 vehicles assessed at $20,000 or less. That assessment totaled $115,683,320. There were 2,799 vehicles over $20,000, and their total assessment, minus the first $20,000, was $55,980,000. The total proposed assessment exemption would be $171,663,320.

The revenue loss, based on the 2011 mill rate of 21.0555, would be $3,614,457.

Mr. Malloy said to ease the transition, municipalities could be allowed the option of providing this exemption, or a portion of it, for the tax year beginning July 1, 2013. After that, it would be implemented statewide beginning July 2014.

To make up for the loss of revenue, towns would presumably either have to cut services or raise property taxes.

The budget for 2012-13 included $74 million to run the schools and $30.3 million to run town operations.

The governor’s proposal is a starting point for the state legislature, which will be working on the budget this session.

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