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5. Targets lower income families first.
While not absolute, the tax burden on vehicles is generally higher in the State's urban centers than in the State's suburbs and rural communities. Given that these same communities are home to the majority of the State's lower-income households, the taxes imposed on vehicles in these communities are disproportionately higher as a percent of income. Furthermore, eliminating the tax through exempting auto values will first impact those families that tend to own lower-valued vehicles. Table 9 sets forth estimated effective tax rates on a $5,000 vehicle based on median family income in each municipality. As shown, estimated effective motor vehicle tax burdens (based on a car valued at $5,000 and median family income) range from 1.35 percent in Providence to 0.14 percent in Jamestown. While income levels will vary among taxpayers and communities, this gives a picture of the relative burden by median family income.

6. Provides direct property tax relief to businesses.
Of the 1.0 million vehicles subject to taxation in FY 2001 (12/31/99), nearly 12.5 percent (131,600 records) are owned by commercial or industrial enterprises. While businesses own 12.5 percent of the total vehicles subject to the motor vehicle tax, these vehicles represent nearly 23.3 percent of the total motor vehicle taxable value. In other words, Rhode Island businesses owned approximately $1.3 billion of the $5.5 billion in FY 2001 motor vehicle taxable value. Clearly businesses relying on vehicle fleets in Rhode Island will benefit from the program.

7. Reduces inter-jurisdictional location decisions based on tax.
There are differences in motor vehicle tax liability among communities, potentially influencing location decisions. Differences in tax rates may encourage individuals to locate in lower tax communities. Tax avoidance, real or perceived, is an issue due to the mobility of vehicles. How local assessors determine situs (actual location for tax purposes) is problematic given this mobility, especially if taxpayers own property in one or more jurisdictions. In addition, fleet-dependent businesses might keep these taxes in mind when considering location and/or expansion.

8. Improves administrative efficiency.
There are over 1.0 million vehicles currently subject to the excise tax in Rhode Island. According to local assessors, assessors and staff can spend between 20.0 and 25.0 percent of their time dealing with motor vehicle tax issues, while collections represent 11.0 percent of all property taxes. Local tax collection staffs also dedicate time dealing with the motor vehicle tax. Several local tax collectors indicated that staffs allocate up to one-third of their time to motor vehicle related issues, while others out-source delinquent debt collection to private debt collectors. If the tax is eliminated, assessors and tax collectors could reallocate existing resources to deal with other aspects of their jobs. For example, communities are now required to update real estate values every three years.