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Rhode Island struggles to eliminate hated car tax

Matt o'Brien, Associated Press

PROVIDENCE, R.I. (AP) -- A tax on cars is so widely despised in Rhode Island that a powerful politician's promise to eliminate it has overshadowed all the other budget priorities state leaders are debating this year.

In Providence, where the annual motor vehicle excise tax is highest — $60 for every $1,000 of a car's assessed value — repeal can't come soon enough for residents trying to make ends meet.

"It hurts," said Geoffrey Moran, after making a quarterly payment at Providence City Hall last week. He said he pays nearly $600 a year on his 2008 Dodge Avenger, but knows others who pay less for cars that are in better shape.

Complaints about the fairness of the tax, which varies by municipality, have fueled calls for reform. But Rhode Island's cities and towns have become so dependent on the $220 million paid to them by car owners each year that any relief proposal would require a major redistribution of money from the state to municipal governments. The three biggest cities — Providence, Warwick and Cranston — account for 36 percent of the total car tax levy.

The biggest champion of eliminating the taxes, Democratic House Speaker Nicholas Mattiello, of Cranston, is intent on fulfilling a campaign promise to his constituents to completely phase out the taxes over the next five years, allowing the state to join 24 others without a car tax. He has publicly sparred with Democratic Gov. Gina Raimondo, who has proposed a 30 percent cut but questions whether a full repeal is fiscally sustainable.

"Now that Rhode Island has started to regain its economic footing, we must have the political courage to eliminate the car tax once and for all," Mattiello wrote in a March 26 opinion column for the Providence Journal.

The newspaper also published a counter-argument from Richard Saslaw, the Democratic minority leader of the Virginia Senate, warning Rhode Island of the "serious takeaways" learned when Virginia attempted car tax relief in the 1990s.

Raimondo's more modest plan would get to a 30 percent cut by changing the valuation method to better approximate the trade-in value of a car. It is modeled on assessments used by neighboring Connecticut and Massachusetts.

A group representing Rhode Island's 39 cities and towns hasn't endorsed either of the rival plans by Mattiello or Raimondo, both of which promise to reimburse cities and towns for whatever revenue is lost. The city most dependent on the taxes is Pawtucket, which relies on car taxes for 14 percent of its tax revenue. At the other end is Newport, where car taxes account for only 2.9 percent because of higher exemptions and a lower rate.

"One of the things our membership is concerned about is the sustainability of car tax reform," said Brian Daniels, executive director of the Rhode Island League of Cities and Towns.

Daniels said no one wants a repeat of what happened earlier this decade, when a 1998 repeal measure was unwound, about $130 million in state aid was pulled back and municipalities had to make up for it by re-taxing vehicles.

The car tax doesn't have many ardent defenders, but some critics of a full repeal say it would endanger funding for schools, hospitals and other important programs. Other critics say it would subsidize driving and offer no relief to the carless.

"The people who would benefit the most are people with expensive cars," said James Kennedy, a public transit advocate who runs the website Transport Providence. "Some of the poorest people don't have cars at all, so you're basically excluding that demographic."