Ruggerio plan: Kill car tax

Finance director questions advisability of proposal

Posted 4/13/22


No Ocean State resident relishes the receipt of their local car tax bill. If you own a car in Rhode Island, it’s possible you’ve seen your last vehicle …

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Ruggerio plan: Kill car tax

Finance director questions advisability of proposal



No Ocean State resident relishes the receipt of their local car tax bill. If you own a car in Rhode Island, it’s possible you’ve seen your last vehicle tax bill. Yet, as much as no one likes paying taxes Warwick City Finance Director Peder Schaefer thinks it’s a bad idea.

On Monday, the Rhode Island State Senate president suggested speeding up a car-tax phase-out to help balance the rising cost of living. If nothing is done this legislative session and no other changes are made, the excise tax would end in FY 2024.

Senate President Dominick Ruggerio, a North Providence Democrat, spoke at the Northern Rhode Island Chamber of Commerce’s “Eggs & Issues” event, and revealed the proposal for a speedy spike of the unpopular gas tax that is collected by municipalities.

“We also need to recognize that Rhode Islanders are feeling the pinch of higher costs,” Ruggerio told the audience. “While by many measures the economy is thriving, and Rhode Island is a national leader in economic recovery, inflationary concerns are very real, and they are being felt by Rhode Islanders.”

Schaefer and City Tax Assessor Neal Dupuis had several takes on the plan to expedite the phase out.

First, Schaefer observed, since former House Speaker Nicholas Mattiello launched the plan for the state to cities and towns what they had been collecting in car taxes, car values have shot up. He said that used car values alone have increased 40 percent.  His point is that if realistic values were used, municipalities would be collecting added tax revenues.

“I feel we are not getting fully reimbursed,” he said. “We would have a bonanza.”

Dupuis also remarked on the dramatic increase in used car sales. However, he said, under the “hold harmless” provisions of the tax phase out motor vehicle owners would not see an increase in their bill if the next step in the phase out is implemented. In fact, Warwick taxpayers would see a drop in taxes as the rate that is currently $30 per $1,000 of valuation is scheduled to go to $20.

Lawmakers passed legislation to phase the tax out over a six-year period in 2017 (two years remain). Ruggerio wants to speed that up, expecting multiple funding windfalls in the next year’s state budget.

“One step that I think we are equipped to take — and that I believe we should take — is to accelerate the car tax phase-out,” Ruggerio told the crowd as the smell of omelets and moderate politics hung in the air. “This will provide lasting relief for everyday Rhode Islanders.”

The senate leader also insists legislators are “also working to provide additional tax relief for our veterans.”

Ruggerio then went on to warn of apathy at the polls and the radical left.

“There are candidates running for office who are downright hostile to business,” Ruggerio said. “The Rhode Island Political Coop is fielding candidates for Governor, Lieutenant Governor, and legislative seats. They are calling for increased taxes. They are calling for a $19 minimum wage, despite the fact that we just increased the minimum wage to $15. Many of their members want to defund the police, which would have disastrous consequences for our small businesses and our neighborhoods.”

He urged voters to cast ballots in this year’s Democratic primaries. He warned his potential “radical” opponents could pick up unexpected wins if voter apathy keeps voters away from the primary polls.

“They are vocal, and their radical ideas get a lot of media attention,” Ruggerio said. “So it is absolutely vital that we also hear from you. We need you to participate in the electoral process. And we need you to participate in elections – including primaries.”

“If you choose to sit out primaries – especially the Democratic primary – then you could be left with only the most extreme candidates in the General Election ... candidates who don’t reflect the values of most Rhode Islanders,” Ruggerio told the chamber.

While he hadn’t heard what Ruggerio had to say, Schaefer thinks progressive Democrats would endorse his views on the car tax if it wasn’t such a political hot potato.

Schaefer agrees that municipal car taxes were high when Mattiello stepped in to correct the situation, but now that they have been reduced he’s not for eliminating them entirely.

“I would say mission accomplished,” Schaefer said. But by removing the tax, municipalities lose an option to collect revenue for a number of purposes from repaving roads to public safety measures. Additionally, he sees automobile excise taxes as discouraging car ownership and as enticement to use public transportation and improving the environment. He said the excise tax is also a means of renters and those who don’t own real estate, which serves as the basis of revenues collected by the city, to help pay for services. It is also a means for elected officials to have contact with these people.

Dupuis also favors retaining the tax.  His point is that the city expenses need to be met and that different taxes pay those bills. Going forward he wants to see how the city could count on the $25 million ($13.3 million in city taxes and $11.7 million from the state).

If the phase out is accelerated, the full $25 million would be paid by the state assuming it is budgeted. Seeing that Ruggerio suggests using federal funds, “that would be easy,” said Dupuis.  Then what? Dupuis said, “We have to wait and see.”  Would the state increase income or sales taxes to raise the funds, might the municipal funding get cut in future budgets?

As Dupuis sees it, the car tax “shifts the burden (of financing city expenses) to other property owners.”

According to a spokesman for Ruggerio if there is agreement on fully phasing out the tax, it would require an additional $63.2 million above what the Governor has budgeted.

House Speaker K. Joseph Shekarchi is waiting for the upcoming revenue estimating conference before entertaining the suggestion to completely phase out the car tax this year according to spokesman Larry Berman. Berman said it is and option under consideration.

 Meanwhile, Ruggerio and other State House leaders will soon be splitting up a plump budget fattened further by more than $1 billion in federal American Rescue Plan Act appropriations awaiting distribution.

Ruggerio, speaking to a room full of business owners, stressed the importance of helping to improve Rhode Island’s business climate.

“Working with the Governor and the House, on our first day of session this year we appropriated $32 million in small business assistance, funded through the American Rescue Plan Act, through the ‘down payment’ budget bill,” Ruggerio said. “This builds on federal funding we appropriated last June, as well as prior funding allocated to assist small businesses during the pandemic. It includes grants to help businesses build their capacity and make needed investments.”

Although the pandemic seems to be fading from public consciousness, its wide-reaching affects are still revealing themselves on a daily basis.

“It is more important than ever that we continue to work to improve our business climate, and to foster job creation in our state,” Ruggerio said. “Our focus in the Senate remains on finding ways to boost our economy and help people get back to work … and that starts with keeping our small businesses open, easing the burdens they face, and empowering them to innovate and adapt.”

car taxes, taxs