Hot spots in Gov’s $9.2B budget

Competing dreams: Free tuition, cuts in car tax?

By John Howell
Posted 1/24/17

Both the governor and the Speaker of the House don’t want to wait.

She wants a budget that includes two free years of college education for Rhode Island students.

He wants Rhode Islanders to …

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Hot spots in Gov’s $9.2B budget

Competing dreams: Free tuition, cuts in car tax?

Posted

Both the governor and the Speaker of the House don’t want to wait.

She wants a budget that includes two free years of college education for Rhode Island students.

He wants Rhode Islanders to get some relief from the car tax this year.

But in an interview Thursday, Gov. Gina Raimondo thought there wouldn’t be time to implement a reduction in car taxes before cities and towns finalize their budgets and issue tax bills for the 2017-18 fiscal year. Raimondo is proposing a change in how motor vehicles are valued from the current clean retail value to the trade-in value. She estimates this would mean a 30 percent reduction in the average bill and result in about $45 million in lost revenues to municipalities, which the state would make up.

Waiting to cut motor vehicle taxes isn’t an option to House Speaker Nicholas Mattiello, says his spokesman, Larry Berman.

“[Mattiello] is looking for immediate relief within the [2017-18] budget,” said Berman on Friday.

Mattiello’s plan calls for increasing motor vehicle exemptions over the next five years until the tax is wiped out. He would start by reimbursing municipalities $45 million and increase that to a total of $215 million annually by the fifth year.

Berman called Raimondo’s plan “a one-time deal” and not the elimination of the tax as Mattiello wants.

Also, Berman believes it can be done to provide tax relief in the upcoming budget. Asked how that might happen if the state budget isn’t approved until mid- or late June when municipalities have already finalized their budgets and sent out bills, Berman said, “they [municipalities] can reimburse them [taxpayers] later.”

Another option Berman suggested was holding the motor vehicle bills until the second quarter, by which time the state budget is passed. He said Mattiello would be speaking to Pawtucket Mayor Donald Grebien, president of the RI League of Cities and Towns, to work out the “details.”

But either of the plans – Mattiello’s or the governor’s – don’t look to be as easy as flipping a switch to Warwick Tax Assessor Christopher Celeste. Of the two, Celeste said Mattiello’s exemption plan would be simpler since that is what was being used until former Gov. Donald Carcieri virtually ended it in 2011. He doesn’t see how either plan could be implemented in time to give taxpayers relief this year. He pointed out that municipalities must set their budgets and tax rates on projected revenues and there’s no way of knowing what the General Assembly is going to do until it passes the state budget.

While there are questions over whether relief can be provided this year, there appears to be a rift over whether the state can afford to completely eliminate the tax.

“Elimination of the car tax is over $200 million a year and this [two years of free college] is under $30 million a year, so it’s not even comparable. The proposal I’ve put forth on the car tax is a 30 percent cut, which would cost the state about $50 million a year and I think it’s a step in the right direction. The way I’m doing it is to go after the unfairness of the evaluation system, so instead of valuing cars at their clean retail value, we’re saying to approximate a trade in value and I have to say… it really bugs people, including me, that we make people pay taxes on a higher value than they can sell a car for. So this just felt like a fair thing to do and it gives people a break,” the governor said.

Asked if there might be other ways to reduce as well as bring equity to the car tax [rates vary by municipality], Raimondo pointed out that Massachusetts has a single rate for the entire state.

“To me it’s all about affordability, you know, obviously it depends on what the rate is and how much money that will cost to reimburse cities. The proposal I came up with just seemed simple, fair, and affordable. But as we go on the next few months, there may be other ways that we could do it,” she said.

Raimondo said she plans to be talking with municipal leaders.

“I just do hope we can provide people with some relief because it’s a real burden for people and it’s a particular burden for people who can least afford it,” she said.

As for Raimondo’s free tuition plan, Berman said Mattiello finds it a “laudable goal.”

“It sounds great,” Berman said, “who doesn’t want something for free?”

But whether it’s a reduction in motor vehicle taxes or free college tuition, it’s got to come out of the state budget and, so far, there’s no offsetting cuts in spending or increase in broad based taxes being proposed. Raimondo thinks charging the sales tax to online sales could generate an additional $30 million annually.

Berman said until there is a study, he has no idea what the sales tax on online sales might total.

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  • richardcorrente

    Please stop calling this "free".

    It isn't.

    It's "taxpayer-paid". That isn't "free".

    Far from it.

    It is a $30 million TAX per year TO START! Then, it increases from there. "Tax and spend" is killing our state. If you want that, this is a great way to accomplish it.

    But please; at least don't lie about it and call it "free". It insults our intelligence.

    Happy Spring everyone.

    Rick Corrente

    The Taxpayers Mayor

    Tuesday, January 24, 2017 Report this