November 22, 2014
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McNamara, Shekarchi address car values, taxes

More than two years after the $6,000 statewide automobile excise tax exemption was eliminated, which allowed municipalities in Rhode Island to reduce the exemption to as low as $500, Representatives Joseph McNamara (D-Dist. 19, Warwick, Cranston) and K. Joseph Shekarchi (D-Dist. 23, Warwick) have drafted bills that attempt to lower car taxes and rectify the situation that revved up emotions throughout the state.

Not only are Rhode Islanders frustrated that the exemption was eliminated, they are also upset because they are being taxed on the full clean retail value of their vehicles, the highest value from the National Automobile Dealer’s Association bluebook. But McNamara says that assessment is “unrealistic.”

In turn, the McNamara bill would amend car tax statutes to require that the assessment of vehicles be based on the average trade-in price, rather than the full clean retail price, after a three-year phase-in period. It proposes that assessors of cities and towns would assess at 95 percent of the clean retail value beginning 2014.

By 2015, assessors would use 90 percent of the clean retail value, and by 2016 and thereafter, assessors would make assessments at 100 percent of the average trade-in value. Additionally, his bill would extend the appeal period from 30 to 45 days.

In contrast, Shekarchi’s legislation would standardize automobile taxes statewide by imposing an excise tax in a flat amount of $600 for vehicles less than three years old, and $360 for vehicles more than three years old. The taxes would begin with the 2014 fiscal year.

McNamara originally drafted similar legislation on the topic about a year ago, which would have modified assessments from full clean retail value to average trade-in retail value, as well as set up a quantifiable appeal process in which vehicle owners would be able to submit a certified appraisal to challenge inflated values.

However, he said nothing ever came of it because many cities and towns wrote resolutions saying that the fiscal impact would be too substantial at this period in time. Also, many Rhode Island mayors and tax assessors feared it would inflate property taxes as a result.

Taking that into consideration, McNamara spoke with Warwick Tax Assessor Ken Mallette and Providence Tax Assessor David Quinn, and asked if it would make more sense to phase in the reductions during the course of three years.

“They agreed that it would be more palatable, and less of a shock to cities and towns,” said McNamara. “That is the strategy that I went with in hopes of getting something passed this year, and something enacted that will eventually bring us to a realistic assessment of our vehicles.”

He said while he realizes that not everyone will be happy with the legislation, he doesn’t see many other options.

“It’ll take three years to get there, but it will be gradually decreased during that period of time and we’ll end up with a realistic assessment of the vehicles,” he said. “We’re looking at a way to make this tax as fair as it possibly can be, taking into effect the strain that cities and towns are under financially.

I believe it’s a fair solution, one that, because of the phase-in period, should give communities time to adjust.”

The bottom line, McNamara said, is that he wants to see the statute amended so residents are taxed a reasonable fee. He views the current method as “very regressive.”

“When this tax is based on an unrealistic value, people do lose their faith in government and the whole system of taxation,” he said.

Shekarchi agreed, saying that while they have each introduced a bill, they have the same goal, which is alleviating the burden the tax has created for taxpayers. The introduction of the bills, he said, will spark a debate, and give them better ideas for the future of the legislation.

“I signed Joe’s as a co-sponsor, and he signed mine,” Shekarchi said. “Joe has one way, and I have another way. No way is better or worse, it’s just a way that will start the debate. The final product is somewhere in between, but at least we are addressing the issue. It’s intended to be collaborative and conclusive.”

Shekarchi said he chose a flat tax because vehicles, whether expensive or not, put the same amount of wear and tear on the road system. In theory, he said, car taxes are implemented to pay for road improvements.

If his bill passes as is, Shekarchi said the loss of revenue would be supplemented through state aid.

“In this year’s budget, we are increasing state aid,” he said. “My belief is that next year, we’ll be able to increase state aid more because the economy will be better. There’ll be enough state revenue to hopefully give the cities and towns to offset the loss in revenue.”

He said he decided to tackle the issue because it was part of his campaign pledge, and feels obligated to honor his promise. The car tax issue, he said, was the biggest problem he heard walking door-to-door.

“People are feeling like they are not paying their fair share – they are paying more,” Shekarchi said. “They feel the assessment and the taxation on their vehicles is not accurate, and consequently, not fair. That’s what drives people crazy. They don’t want to pay on a vehicle that’s worth a lot less than what the state assesses it at.”

McNamara anticipates his bill will be up for vote as early as the end of the month. Shekarchi says the same of his own bill.

“I encourage anyone from Warwick who’s interested to come and testify on the bills, and improve the bills if they think there’s a way to improve them,” he said.

Warwick resident Rob Cote, who spawned the car tax revolt in the summer of 2011, said in a recent phone interview that he will most likely attend the hearings to voice his opinions.


Comments
3 comments on this item

Shekarchi’s idea is terrible, the poor with older vehicles would be unfairly taxed, while someone with a $40 or $50 K new car would be capped at $600. I hope that no one takes his proposal seriously!

Both bills are terrible and poorly thought out. Lets address Macnamaras bill first. This bill simply kicks the can down the road for another 3 years. In addition, anyone who has a car older than 4 years old will see a tax increase. Presently, the vehicle value system works on a descending value. You pay 100% OF THE FULL CLEAN RETAIL VALUE for the first 4 years and then each subsequent year you pay 5% less than the 100% full clean value. The vast majority of the cars on the road would see a tax increase there by stuffing the tax coffers, which has we all know, go to pay for legacy costs, salaries, and healthcare. More importantly, the bill does not address the constitutionality of paying a tax on a ficticious value.

For example, a 2006 auto under this bill would pay 25% more tax than what is paid currently. Lets see this bill gather any strength.

Now for Shekarchi's bill. This bill again is not thought out whatsoever and the previous poster is partly correct. If one person buys a 2013 Mercedes Benz $50,000 car (such as Shekarchi's) and his nieghbor buys a 2013 Toyota Corolla $12,000 car, they both pay the same tax. How is that fair. What it does is give a tax break to people that can afford more expensive cars, and the vast majority of the people in the state will subsidise the Mercedes owners. And what about the people who presently dont pay tax in Warwick due to the fact that their car is worth less than $2000, I dont think that they will be happy with Mr. Shekarchi's useless bill that has zero chance of getting out of committee. Mr. Sekarchi has already argued that the car tax money should be evenly distributed so that the tax can go to support our roads. Presently we pay .52 cents/gal for road use tax that is getting squandered on both the state and federal level. In the citiies and towns, that money again, as in Warwick, is needed to pay for legacy costs, healthcare, and salaries. Not one penny of the revenue generated in Warwick by the auto taxes goes to the roads and it never will. I am surprised that Mr. Shekarchi doesnt realize that Warwick does not have a pot hole repair or paving program. The 1/2 million that was always set aside for roads was also squandered because presently Warwick has $660 million dollars in unfunded liabilities. $660 mil if you beleive the rate of return to be 7.5% which as we all know is not. Drop that to 5% and the liabilities go over 1 billion.

The solution is simple fair, equitable and constitutional. All cars should be valued at the "Average Trade Value". Period. The tax assessors and the union owned politicians will argue loss of revenue. When they do, I will argue as I have in the past, $8 million in free health care that needs to end, minimum manning that has to end, perpetual contracts that have to end, full time health care to part time employees that has to end, rediculously generous co-pays that need to end, sick pay buy back benifits that need to end. 15 paid holidays that need to end, and the unending theft of the city coffers that is overlooked, needs to end.

As a side bar, the car tax was supposed to have disappeared several years ago> Why is it back? ANSWER: PENSIONS, SALARIES, HEALTHCARE COSTS.

Wow...everyone is studying these two plans as if they should exist at all. Why am I paying taxes on my cars? I pay sales tax when I buy them and every single year after I have to pay for the privilege of owning them. This state is awful and I'm counting down to the big exit to Florida.

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