Budget Bill Continues Car Tax Phase Out

STATE HOUSE – House Speaker Nicholas A. Mattiello’s plan to phase out the automobile excise tax moves into its second year in the 2019 state budget passed by the House today.

“I am pleased to continue to move forward with the plan to eliminate this unfair, regressive and oppressive tax,” said Speaker Mattiello (D-Dist. 15, Cranston). “As long as I’ve been a representative, Rhode Islanders have been telling me about what a burden this tax is, and how unfortunate it is that the previous plan to eliminate it was halted. I’m steadfastly committed to ensuring that this time, the plan crosses the finish line and we see the end of the excise tax in Rhode Island. Funding the second year of the phase-out was a priority for me this year, because this is something that matters to the people of our state.”

The budget (2018-H 7200Aaa)  includes $54.7 million to fund the program in 2019. That funding replaces lost excise tax revenue for cities and towns, since the excise tax is levied by municipalities, not the state.

Under a plan proposed by Speaker Mattiello last year and included in the 2018 state budget, in 2018, the state began reducing the percent of retail value that can be taxed from 100 to 95 percent, the minimum exemption that must be applied to all cars went from $500 to $1,000, and all cars older than 15 years became exempt.

Under the 2019 budget bill just passed by the House and heading to the Senate next week, in 2019 the minimum exemption will be raised from $1,000 to $2,000, the assessed value will drop from 95 percent to 90 percent, and municipalities’ tax rate cap will be reduced from $60 per $1,000 of assessed value to $50 per $1,000.

The assessed value percentage and rate cap will continue to drop, and the minimum exemption will continue to rise until the tax is wiped out entirely in 2024.