June is a wonderful month for most of us. Longer days, warm days, flowers in bloom.
Then the mailman rolls on by and drops off letters and bills. One bill that most people
who own cars receive towards the end of June beginning of July is the yearly Property Tax Bill from your town hall.
After reviewing my tax bill for my automobile, I noticed something that I thought was a bit odd.
The value of my car was 12% more than it was last year. My total tax due to my town was $135.45.
Not a great deal of money, but on the other hand my biggest issue was why my car had increased in value.
I always pay my automobile tax in person and in cash. While being waited on by the Tax Collector of my town,
I kindly asked her if I could ask a question regarding the bill. In a polite way she said, “I might be able to. What is your question.”
“How do you determine the value of a car to apply the tax.”
“Well, I can’t answer that.”, she said, “You see I only collect the tax, I don’t assess the value of the car.
What you need to do is talk to the assessors office.”
My mind was racing. I am thinking on my way to the assessors office that you need to have one
government agency collect the tax, and another one to asses property value. Wouldn’t you want to
have just one department, save money and stream line the whole operation. Oh wait that is right
we are talking about government, that’s not the way things are done. Wonderful!
I walked into the Tax Assessors office.” Sitting at her desk she looked up and asked, “How can I help you?”
I asked, “I would like to know how you place a value on a car for tax purposes. I am a bit confused as to why my car’s
value went up when it was just another year older.”
Well I learned allot from this conversation, and to spare you all the other details, lets just go over the facts shall we.
First Cash for Clunkers officially known as Car Allowance Rebate System (CARS) played a major roll in determining
the value of my car. The program was effective from July 1, 2009 and November 1, 2009.
The goal of the program was to remove older, inefficient cars from the road,
and stimulate the auto industry, which has fallen on hard times. This all plays into the whole GM bailout, that is a whole other story.
The Requirement to trade in a car under the program had to meet these three guidelines
- Car must be at least 10 years old and have been made after 1984.
- Trade-in must get 18 mpg or less in combined highway and city driving.
- Must be registered and insured in purchaser’s name for 1 year prior to trade-in.
And to qualify for the trade in voucher the vehicle had to meet these standards
- Passenger vehicles must average 22 mpg, improve at least 4 mpg over trade-in, and cost less than $45,000.
- Small light duty trucks must improve 2 mpg over trade-in.
- Large light duty trucks must improve 1 mpg over trade-in
- Passenger vehicles must improve 10 mpg over trade-in.
- Small light duty trucks must improve 5 mpg over trade-in.
- Large light duty trucks must improve 2 mpg over trade-in.
Depending upon the guidelines that you met you either got a $3,500 voucher or a $4,500 Voucher.
Now how does this all play into your Automobile Property Tax you ask? Well here is the unintended consequence of
Cash for Clunkers.
As a result of this program the number of older cars available to purchase as used cars fell. This had the effect of making those
that remained on the road more valuable. The effect was the government made something scarcer which drove up
the cost on the remaining vehicles that were NOT traded in.
So one would ask why a town not use the Kelly Blue Book Value of an automobile. Well they can’t?
According to the Laws of The State of Connecticut they are required to use the NADA Used Car Guide.
Conn. Gen. Stat. §12-431(b) and Conn. Agencies Regs. §12-431(b)-1 provide that the value of a motor vehicle in the current month’s N.A.D.A. Official Used Car Guide, Eastern Edition, is presumed to be the total purchase price of the vehicle. When the motor vehicle is registered, the Department of Motor Vehicles will collect use tax on the greater of the N.A.D.A. book value or the amount paid for the motor vehicle.
Comparing the value of a USED car with both books will result in two different outcomes.
As a result of Cash for Clunkers, NADA explains it this way
“The combination of diminishing new and used vehicle supply and increased
consumer demand drove used vehicle prices upward between October 20101 and October 2011.
First at the wholesale level (dealers purchasing vehicles at auctions to sell as retail units on their lots) and
then at the retail level.
The bottom line is there is no longer an easily predicted rate of depreciation for used
vehicle values. Economic drivers including gas prices, new and used vehicle
supply,. major weather events, domestic and international
political instability and many other factors will continue
to influence used vehicle values and may result in increases or decreases year over year.”
So as you can see after Cash for Clunkers program was over the price of used cars rose.
One other bit of information that you need to know. When you pay the property tax on your car, I am not sure if it
this is true for a house or building, you are really paying for the previous years tax, 2011, not 2012. The value of the
your car therefore was assessed in your towns fiscal year of the previous October.
It also gets a bit weirder too.
I was told that when I paid my tax on July 24, 2012 at 1:13pm, I was really paying
half of the towns fiscal year 2010-2011, and the other half was being applied to 2011-2012
There has been talk about repealing the property tax on cars in the state.
Even Gov. Jodi M. Rell proposed repealing the property tax on automobiles in 2006,
and made up for the lost revenue with in her budget.
And by the way there are 37 states that do not place a property tax on automobiles.
Living in a state with one if not the largest tax rate on gasoline, I think its time that the citizens are given a small break
by repealing this nuisance tax.