New Haven Independent

Rell made her proposals during her annual “State of the State” speech at the Capitol in Hartford, in which she summarized her proposed $16 billion budget for this year. Thanks to a projected $500 million surplus, Rell was able to throw around some money this year without busting the constitutional cap on spending. Her proposed new budget contains some modest new money for, among other things, mass transit (including commuter train service from New Haven to Hartford) and a new economic development bureaucracy aimed at luring more jobs to Connecticut. (As of today she refers to herself as “Connecticut’s CEO.”)

(Click here to read Rell’s speech in its entirety.)

But the big news Wednesday was Rell’s call to abolish property taxes on cars.

She spoke of the unfairness in the system. How a Waterbury owner of a 2000 Chevy Cavalier pays his city $278 a year in property taxes for the car, while a Greenwich owner of a 2005 Mercedes sedan pays $273.

“Forget about equalized tax rates. Let’s get rid of the tax altogether,” Rell proclaimed.

A lot of people clapped.

She said people in Connecticut “deserve” this tax break and “deserve it now.” She called her proposal “a bold step to eliminate a regressive tax and to put millions of dollars back in the economy. It is a step which will make Connecticut a much more attractive place to live, while reducing the financial burden on the average working family.”

Under her plan, people would stop paying property taxes on their cars as of July 1. The state would reimburse cities and towns for the property taxes they would lose - at 100 percent of the taxes owed, even if they don’t usually collect 100 percent.

That would cost the state $497 million a year. According to Rell’s budget chief, Robert Genuario (shown speaking to reporters at the Capitol press room after the speech), some $325 million of that money would be made up by eliminating the $350 annual property tax credit many people currently receive.

The state would also divert the state’s share of Indian casino gambling revenue, which currently goes into the general fund, into a special fund to reimburse cities and towns for the lost car-tax revenue.

Questions Large and Small

In press briefings and conversations with Capitol Democrats Wednesday, questions both technical and philosophical arose about Rell’s proposal.

Among them: Rell’s administration bases its financial projections on cities’ and towns’ current mill rates. What happens when those rates - and the lost revenue — go up in the future? And what happens if legislators decide in future years to cut back on the gambling money they’ll dedicate to this fund?

“You can not-fund something,” noted New Haven State Rep. Bill Dyson, referring to the state’s cutbacks over the years in the PILOT (Payment in Lieu of Taxes) program that reimburses cities for lost tax revenues from not-for-profit institutions.

“I can’t tie the hands of future legislators. But rarely have legislators reduced as opposed to not increased growth in spending,” Budget Director Genuario told reporters.

State Rep. Dillon warned against taking this year’s surplus for granted. “We have a surplus this year. We have a lot of entitlements, a lot of federal cuts. I’d be careful about giving up any revenues. I’m concerned about supporting any tax cuts.”

State Rep. Peter Tercyak of New Britain argued that what looks like a break for the little guy is actually a hand-out to rich people in Greenwich.

The reason old cars cost more in taxes in Waterbury than fancy new cars in Greenwich is because of a broken property-tax system, Tercyak noted. Rell’s car-tax proposal is “the worst way” to try to address it, he argued. Sure, some car owners in cities will benefit. And some people in cities - like elderly people who own homes but not cars - will pay more in tax because of the elimination of the $350 annual property tax credit. Meanwhile, he said, everyone in Greenwich turns out a winner, and a big winner, saving thousands of dollars a year in car taxes.

“The wealthy will pay less. But the middle class and the poor? Some will. Some won’t. The blind guy who takes the bus? His taxes just went up.”

Genuario acknowledged that some people will pay more taxes under this proposal. But the overwhelming majority will benefit from the cut, he claimed - including some of those elderly homeowners with no cars, depending on the size of their social security benefits.

New Haven State Sen. Martin Looney, the Senate’s majority leader, said Democrats are open to “discussing” the car tax cut with Rell. But he made it clear he’s skeptical. Looney (shown in his legislative office Wednesday) and other Democrats in the past have tried to pass a uniform statewide motor vehicle tax to get at the inequity issue. Rell’s idea, according to Looney (shown Wednesday in his Capitol office), is a break for the wealthy disguised as a break for the average Joe.

The $350 a year property tax credit mainly benefited middle-class people, he said. Now that will be lost. Rell’s proposal helps the wealthiest people who own expensive cars and were already making too much money to qualify for the property tax credit, he said.

“Some millionaire in Greenwich who doesn’t qualify for the property tax credit, who owns three Mercedes and two BMWs, this is a big windfall for him,” Looney said.

The Bigger Picture

Rell’s tax cut proposals and her overall speech feel flat, of course, with the Democrats seeking to replace her.

“She defined the race very clearly - instead of providing real leadership and a bold plan for creating jobs, she has proposed a shell game, taking the money out of one pocket and putting it into another,” John DeStefano said. “This is a real cynical shell game for Connecticut’s families.”

Stamford Mayor Dannel Malloy focused on the short shrift Rell gave to health care. Malloy has proposed a plan to insure all 71,000 children currently without insurance in Connecticut.

“The governor did not mention health care once,” Malloy said. “This has the ring of a bait and switch.”

Health care was also on the minds of social-service advocates from One Connecticut. “There is nothing out there to help the 400,000 people who are uninsured and the 200,000 who don’t have enough insurance,” said Gretchen Vivier, director of the Health Care for All Coalition.

On the surface, it looks “great the cut the car tax. It’s a regressive tax,” said Jane McNichol, executive director of the Legal Assistance Resource Center of Connecticut. But she’s worried about the services that might get cut now that the state’s casino proceeds would be diverted to pay for the cut.