RESTART CAR TAX PHASE OUT
If there is one concept where all Rhode Islanders are sufficiently schooled, it would be on taxation. Rhode Islanders know the state’s mantra, “if it moves, tax it!”
The motor vehicle and trailer excise tax is a perfect example. This tax passed in 1978 and its sole purpose was to generate municipal revenue from a different source than property taxes. Even though the title of the law is “excise tax,” this is, in fact, another property tax.
Rhode Island ranks as the 8th highest taxed state in the nation according to the Tax Foundation. Rhode Islanders pay more in state and local taxes than 82% of other states, illustrating again that Rhode Island is an outlier and at an economic disadvantage. To compound the problem, Rhode Island depends heavily on these resident taxes. Rhode Island ranks 6th nationally for the highest percentage of state and local tax burden used as state income, 10.9%.
Even though many do not like to believe, states are in direct competition with each other. People will travel to purchase cheaper goods and businesses will locate where their costs are low. Historically, Rhode Island has always been a high cost state. Labor and energy are higher in the Northeast than in many other regional locals; however, Rhode Island further increases these problems by levying burdensome taxes.
Would a business locate in Rhode Island? The answer, unfortunately, is “no.” Businesses employ workers and create jobs. When jobs are not present people move, and when population declines, the workforce quality declines as well. Consider Rhode Island’s migration trend. According to the Census Bureau, Rhode Island was 1 of only 2 states to lose population from 2011-2012; people vote with their feet. When the jobs are not present, those who have the opportunity to move do so. We need to change this trend.
Our proposal is to re-institute the Motor Vehicle Excise Tax Phase out. This tax was eliminated in 1999 according to the Appropriations Acts; however, severe budget deficits coupled with the economic downturn forced policy makers to pass the tax burden in 2010 back to the municipalities. Under our 9 year phase out proposal, we would increase the exemption amount by $500 for the next 6 years and by $1,000 for the final 3 years.
There will be a tangible cost to the state treasury for this policy. Current budget forecasts project the phase-out will cost an additional $8 to $27 million per year depending on the year.
Consider how this policy will impact the life of an average Rhode Islander.
Click here to see the bill
filed by State Representative