Car tax fix stalls


Car tax fix stalls

Efforts have stalled in the state Legislature to fix Georgia’s new car tax, which went into effect Friday.

Now customers and car dealers alike will have to wait at least over the weekend for an answer to the law’s problems, which include a double tax on car leases.

The impasse came despite Senate passage Friday morning of a proposed fix for the inequities created when the Legislature overhauled the state’s tax code last year. The Georgia State University’s fiscal research center estimated that House Bill 266 would reduce state revenue by at least $74 million through 2017 — a reduction Senate supporters touted as a tax cut.

House leaders, however, disagreed with how the Senate reached that number: Millions of dollars in tax breaks for used-car dealers and dealers who finance car loans themselves. Advocacy groups such as the Association of County Commissioners of Georgia were also angry at the potential impact on county revenue.

The bill was doomed before senators even logged their vote, after representatives of Gov. Nathan Deal met with state revenue officials and jointly deemed the proposal unworkable.

“In that meeting, I expressed serious concerns with the difficulty, if not impossibility, of the state and local governments being able to effectively administer (certain) portions of the bill,” state Revenue Department Commissioner Doug MacGinnitie told The Atlanta Journal-Constitution.

The Legislature will next be in session Monday. The House amend HB 266 at any time and vote on it; passage would send the bill back to the Senate for an up-or-down vote on the changes.

But it is hard to say when the House will act. House Majority Larry O’Neal, R-Bonaire, said the Senate version is “flawed, just fundamentally.” He set no timetable to resolve those differences.

House and Senate leaders gathered on the House floor with lawyers and aides in search of an agreement as the House adjourned.

The efforts to find a fix come a year after the state Legislature made sweeping changes to the state’s tax system, including car taxes. While the overhaul eliminated the hated annual “birthday tax” paid by car owners for annual registration, it created a new system of vehicle taxes meant to keep revenue flowing.

The problem, however, is that last year’s changes caused several problems affecting consumers and industry people alike.

In a rush to fix those problems, House lawmakers passed a version of the bill Feb. 14 without determining how much it would cost. Their leadership believed it was revenue-neutral.

But when it was the senators’ turn to consider the bill, they asked Georgia State for an estimate of its cost. The answer? It amounted to an increase in state revenue of $141 million — which senators immediately deemed a deal-breaking tax increase.

House leaders said the bill was not a tax increase because it should be scored with the 2012 overhaul, which included revenue cuts to balance the increases from the new vehicle taxes.

O’Neal said the state cannot afford the tax cut the Senate has now proposed.

“We’re about to do the (fiscal 2014) budget, we’re already having to cut to the bone,” he said. “We don’t have it.”

Under the bill, leasing agents would have the double tax removed, rental car companies would see a new tax reduced and car dealers would have gained from changes in how a car’s value is determined for tax purposes.

The Senate, however, favored one other group: so-called “buy here, pay here” dealers, who typically charge high interest to customers with bad credit. Once a customer defaults on the loan, the car is repossessed, the dealer sells it again and the cycle continues.

Under the 2012 tax overhaul, and in the House’s version of this year’s proposed fix, those dealers would have to pay a title tax every time the car is sold. They did not like that idea and won a reprieve from the Senate: The dealers would pay 2 percentage points less than the normal title tax every time they sell a car.

And the way the Senate’s bill is written, it defines “buy here, pay here” dealers to include a much larger group: used-car dealers who have majority ownership in a finance company making the loan to a car buyer.

“We are not predatory lenders,” said Sen. Emanuel Jones, D-Decatur, who owns several car dealerships and abstained from voting on the bill. “I don’t charge exorbitant fees. We provide a very, very valuable service that is simply to allow (buyers) to pay as they go.”

As of Friday, the state’s title tax for car sales is 6.5 percent. If the Senate’s version of HB 266 passes, used-car dealers and “buy here, pay here” dealers would pay the reduced rate.

“It’s wrong to pick winners and losers,” said Sen. John Albers, R-Roswell, who voted for the bill anyway.

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