Car Tax Dodgers—Providence Plans Crackdown
Tuesday, July 12, 2011
An estimated 2,000-plus Providence residents do not pay taxes on the cars they keep in the city—and now local officials say they have found a way to crack down, netting nearly $1 million in additional revenue.
At a time when the city faces a financial emergency, Councilman Sam Zurier said the city can ill afford to allow so much money in taxes go uncollected.
The issue is especially relevant as the council considers a nearly 5 percent increase in the property tax levy. “Let’s make sure that people are complying with their obligations … and get as much revenue from people doing what they’re supposed to be doing before we go to the taxpayers and say, ‘We’re going to ask you for more money,’” Zurier said.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTZurier is sponsoring an ordinance that says anyone receiving a homestead exemption on their property taxes must have the cars they keep in the city registered here—and must present evidence that they are paying taxes on those cars. The new ordinance would take effect the next time an owner applies for a homestead exemption, on December 31.
“In effect this is a new program to beef up the homestead exemptions and it really is something that the state has been requiring people to do—and nobody’s doing it,” Zurier said.
Nearly $1 million in lost taxes
Of those who have homestead exemptions, 6,371 owners do not have their cars registered with the city, according to data provided to GoLocalProv by Internal Auditor Matt Clarkin. On average, 38.4 percent of the cars in the city are worth more than $6,000—at which point the city’s current car tax rate of $76.78 kicks in. Based on that rate, an estimated 2,446 owners with homestead exemptions have cars that could be eligible for the tax, according to Zurier. (This assumes an average of one car per owner—balancing out those who may not have cars with others who have more than one car.)
The total amount in taxes owed by those 2,446 residents in the current year adds up to $941,075.
The key point is that these residents are already receiving a tax exemption as high as 50 percent on their homes, said Councilman David Salvatore, a co-sponsor of the ordinance. “This is a fairness issue—an effort to make sure that people are not taking advantage of loopholes in the law,” Salvatore said. “If we’re going to give tax breaks, let’s make sure they are going to be used to improve the quality of our neighborhoods.”
The ordinance passed the City Council last Thursday and needs one more affirmative vote before it lands on the desk of Mayor Angel Taveras, who supports it. “Mayor Taveras commends Councilman Zurier for his diligence in working to close this tax loophole and ensure that Providence residents who receive a homestead tax exemption pay their required taxes on the cars they keep in the city,” said spokesman David Ortiz.
Under changes to the car tax proposed by the City Council last night, even more residents with homestead exemptions could owe car taxes. The new deal would lower the exemption level from $6,000 to $1,000—in an effort to snag more payers. It would also lower the rate from $76.78 in the past year to $60 per thousand in value for the new fiscal year.
New law would have affected the Governor too
One of the most recent prominent cases of an owner with a homestead exemption who was not paying car taxes involved Governor Lincoln Chafee. Last November, GoLocalProv reported that Chafee was receiving a homestead exemption on an East Side home, but had his cars registered at a family farm in Exeter, where the car tax rate last year was about half that of Providence at $32.59 per thousand in value, versus $76.78 in the capital city.
At the time, Chafee and his wife did not have any cars registered in Providence. But they did have 11 motor vehicles registered in Exeter, including a 1997 Audi and three Toyota Priuses. After taking office in January, Chafee put the home on sale, essentially rendering the issue moot for him.
But the public outrage generated by the situation could make city residents more receptive to the effort to clamp down on noncompliance, said one community leader. “Given the kind of annoyance—to be polite—that people felt when Governor Chafee appeared not to be in compliance with that provision … that such an ordinance would be popular would not surprise me,” said William Turret, a past president of the College Hill Neighborhood Association and a current member of the Providence Revenue Commission.
Turret says those who still dodge paying city taxes will find a new loophole. “Never underestimate the creativity of those who will find a way of avoiding a fee or a tax,” he said.
Personally, Turret said he agreed with the new ordinance. “Otherwise it would be havoc,” he said.
The leader of a citizens group also praised the measure and she called on residents to step up to their plate and help the city. “All the residents of Providence—we should pull together for the good of the city,” said Karina Wood, executive director of BetterProvidence. “We need to play our part.”
A broader crackdown on tax delinquents and dodgers
The crackdown on car tax dodgers is part of a broader effort to tighten up enforcement of city taxes and fees. Last month, GoLocalProv reported that about $1 million in police detail payments was in arrears—for a number of years, in some cases.
In effort to clamp down on delinquents, the city is eyeing another ordinance that would prevent businesses and organizations from receiving any permits, licenses, license renewals, and additional police or fire details until the balance is paid in full.
Zurier said the same idea could be extended to individuals and businesses that are behind on other taxes and fees owed to the city. “The idea is that if we have issues with delinquency that’s your best opportunity to actually catch people up,” he said.
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