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.