Car-tax hikes leave owners fuming

Overhead Door Garage Headquarters President Scott Grace has more than the usual Rhode Island horror story about an old truck with a huge vehicle excise tax bill – he has 20 such stories to go with his fleet of trucks.
Complaints about the size of motor-vehicle excise tax bills in the state are nothing new, but since lawmakers facing a budget crisis last year allowed cities and towns to lower the standard $6,000 vehicle tax exemption, grumbling has turned to outrage.
Now, spurred by angry constituents and business groups, a number of state and local officials have come out in support of changing the law that spells out how vehicles in the state are valued for tax purposes.
Grace’s Warwick-based company, which sells and installs garage doors throughout the Northeast, relies on those trucks to get employees and materials to job sites throughout the region.
But when Grace receives his vehicle tax bills each year, the 2004 GMC truck parked in Warwick costs about four times more in tax than a similar truck parked at Overhead Door’s Norwood, Mass., office.
In this year alone, the tax bill for each Rhode Island truck rose 30 percent, Grace said.
So as the company expands and hires more workers, Grace said those added tax costs are making him consider moving operations across the border to Massachusetts or Connecticut.
“It is pretty eye-opening the spread between what we are paying in Rhode Island versus Massachusetts,” Grace said. “We have some decisions to make about where we put some resources in the future, about where we hire people. This is a contributing factor.”
Rep. Joseph McNamara, D-Warwick, has pre-filed a bill for next year’s legislative session that would require the age and condition of a vehicle to be taken into account in determining its value.
“This is a very difficult, regressive tax. What we want to do is give people a more accurate assessment,” he said.
McNamara’s hometown of Warwick has been a hotbed of car-tax discontent this year after the city, facing an $11 million budget gap, cut its vehicle tax exemption from $6,000 all the way to the $500 minimum.
The change meant that residents and businesses with old clunkers worth less than $6,000, who previously had never received a tax bill for those vehicles, were charged for the first time while the owners of cars already over the limit saw their bills skyrocket. That sticker shock has prompted many to question the way vehicle values in the state are calculated.
For years, Rhode Island has used the “clean retail value” set by the National Automobile Dealers Association, which doesn’t take into account the wear and tear that drops the resale value of a car the minute you drive it off the lot.
In McNamara’s case, the car that brought home to him the absurdity of the system is a 1999 Plymouth Breeze sedan that he handed down to his daughter, but is being valued at $3,000 in his annual excise tax bill, he said.
“The old system does not take into consideration the mileage of the car,” McNamara said. “One constituent said, ‘I don’t mind paying the tax, but when I saw the vehicle valuation, that was adding insult to injury.’ ”
When lawmakers reconvene in January, McNamara’s bill may not be alone.
House Speaker Gordon Fox, D-Providence, has signaled an interest in re-examining the excise tax formula and has scheduled meetings with other leaders to discuss possible changes before the end of the year.
“Speaker Fox expects this to be one of the most important issues in the coming year and anticipates hearings to take place in the early stages of the legislative session that will ultimately result in some changes being implemented that will be equitable to both the municipalities that benefit from the revenue and to the taxpayers who fund it,” Fox spokesman Larry Berman said in an e-mail statement.
And another lawmaker, Sen. William Walaska, D-Warwick, has filed a resolution asking the Vehicle Value Commission to recommend an alternative method for determining how much a car is worth.
For Walaska, a late 1980s Jeep Grand Cherokee that was valued at $4,000 convinced him the current system needs to change.
“Obviously they can’t look at every vehicle, but there has to be a simple, sliding scale that would be better,” Walaska said.
Even members of the state Vehicle Value Commission, a panel of local assessors that hears excise tax appeals, acknowledge that the system could benefit from change.
Commission Chairwoman Linda Cwiek, who is also the North Kingstown assessor, said commissioners had discussed a number of potential changes, including a flat charge for vehicles above a certain age and a declining percentage of the suggested manufacturer price, at a recent meeting. Cwiek said whatever formula is used, she would prefer to see the whole system contained in state law and the Vehicle Value Commission’s role reduced.
“No matter what method you pick, someone will not like it,” Cwiek said.
As expected, residents of the state’s larger cities have been hit the hardest by the changes.
Not only were struggling cities more likely to reduce the exemption than wealthy towns, but larger cities are also more likely to have higher tax rates.
Providence has the highest vehicle tax rate at $60 per $1,000 of assessed value, with Pawtucket second at $53.30 and Woonsocket third at $46.58. Providence has a $1,000 exemption, while Pawtucket and Woonsocket are both at $500.
The community with the lowest vehicle tax rate is New Shoreham at $9.75 per $1,000 of assessed value, with Charlestown second at $13.08 and Little Compton third at $13.90. New Shoreham and Little Compton are two of the eight communities that have kept the $6,000 exemption.
Of course, while changing the method for determining vehicle value may cure some of the inequities of the current system, by itself such a change could leave communities with major holes to fill in their budgets.
If a new valuation formula results in smaller tax bills for old cars, most people expect cities and towns will try to raise their rates to make up the difference.
“Sadly, it does boil down to alternative ways of dealing with vehicle values, which in many communities is a substantial source of revenue,” said Daniel Beardsley, executive director of the Rhode Island League of Cities and Towns, which has planned a meeting on the issue with state leaders and the Vehicle Value Commission in early January.
For groups such as the Rhode Island Builders Association, which has made lobbying for change in the vehicle tax a top priority, seeing valuations drop and rates rise doesn’t seem like much progress.
“When you look at the numbers, we have both the methodology of the valuation and the tax rates that are completely out of line with other states,” said Grace of Overhead Door, a member of the association. “It is these types of taxes that attack the financial infrastructure of companies like ours.” •