MD Rahman

Today, state Senator MD Rahman (D-Manchester) unveiled a plan to eliminate the Motor Vehicle Property Tax. The proposal follows months of work by the Motor Vehicle Property Tax Taskforce, a working group that has studied the feasibility of repealing the motor vehicle property tax and replacing the municipal revenue the tax currently provides.

“The motor vehicle tax is one of the most regressive and complicated taxes in Connecticut,” said Senator Rahman, who co-chaired the task force and serves as Senate chair of the legislature’s Planning and Development Committee. “We have worked to identify options to eliminate this tax and help our towns and cities replace the revenue they rely on to support critical services.”

Senator Rahman’s proposal would repeal the motor vehicle property tax for Connecticut families, but give municipalities the option of maintaining the property tax on commercial vehicles. This would help to offset the revenue lost by towns and cities.

Statewide, the car tax brings in roughly $1.179 billion in municipal revenue. Maintaining the property tax on commercial vehicles would preserve around $193 million, lessening the repeal’s impact on local budgets.

To make up the difference, Senator Rahman’s proposal would allow municipalities greater flexibility to set their own assessment ratios on real property. Currently, state law requires towns and cities to assess property at 70% of its actual value.

The proposal would enable municipalities to increase their assessment ratios on property like land and buildings up to a cap set at the threshold necessary to recoup revenue lost by the repeal of the motor vehicle property tax.

“This plan repeals an unpopular and unfair tax while empowering municipalities to recover lost funds through a predictable revenue stream,” Senator Rahman said. “Eliminating the motor vehicle property tax puts Connecticut towns and cities on a path toward a simpler, more equitable tax code.”

The motor vehicle property tax is considered a regressive tax because its burden tends to fall disproportionately on residents of lower and middle income communities. That’s due in part to limited tax bases in many cities, where much of the property is owned by nonprofits or tax-exempt entities that operate hospitals, universities or other government functions.

Although these entities provide necessary services that support residents of the region, including taxpayers of nearby towns, they reduce a city’s overall tax base and result in higher mill rates. Because of those elevated tax rates, residents of lower income communities often pay significantly more in car taxes than a resident of a wealthier town who owns the same vehicle.

Senate Democrats will advance a bill on the motor vehicle property tax as part of their 2024 legislative agenda during the session that begins tomorrow, Feb. 7.