Our Opinion: New car fee would hurt most Georgians

General Assembly members ready to congratulate themselves for repealing the so-called “birthday tax” on motor vehicles are apparently oblivious to the reaction the plan drew from many of their constituents.

“Republitards going after the taxes of people trying to get by and tax relief for the wealthy,” wrote DLink on an ajc.com forum last week.

“Republicans, and I am one, you got this one wrong !!!!” wrote GTgrad86. “This bill only helps the well off.”

“Only in GA can the legislature and the Repubs come up with new ways to stick it to the average guy and give a break to the fat cats,” wrote WTF.

Those complaints, while overheated, are unfortunately accurate.

Under House Bill 480, a one-time 7 percent fee would be assessed on all vehicle sales. For the first time, that would include vehicles bought from a neighbor or family member or through classified ads or Craigslist, which are currently excluded from sales taxes.

In addition, the bill caps the maximum fee at $1,500.

That means the buyer of a used, $21,500 minivan would pay a $1,500 fee, and the buyer of a $150,000 Mercedes would pay the same $1,500 fee. In effect, most of the value of that Mercedes would be immune to taxation, while all the value of the minivan would be taxed. That’s unfair to the point of being outrageous.

It wouldn’t be hard to fix that problem. The most straightforward approach would be to simply remove the cap and make all the value of vehicles taxable.

Alternatively, legislators could rewrite the exemption to help out all Georgians, not just those buying luxury cars. By exempting the first $5,000 of value, legislators would give every buyer a break and allow many used-car sales to stay tax-exempt.

As currently written, the fee cap represents only part of the tax break that HB 480 would give to purchasers of luxury cars. In fact, it would impose a significant tax shift away from the wealthy and onto the rest of Georgia.

Under the current system, those who buy vehicles from dealers must pay a sales tax on the entire purchase price. In addition, vehicle owners pay an annual ad valorem tax, based on the value of the car.

For the purchaser of a $150,000 Mercedes, a 7 percent sales tax on the entire purchase price amounts to $10,500. He or she also has to pay the annual ad valorem tax on that car.

But under HB 480, the Mercedes owner would pay a one-time fee of $1,500 with no recurring annual tax.

Defenders of HB 480 argue that the bill eliminates the gaming of the current system. For example, some businesses now dodge the sales tax by forming a dummy corporation that buys vehicles tax-free and rents them back to the business. That trick exploits a loophole in the law that exempts rental cars from the sales tax.

As dealers point out, current law also puts them at a disadvantage because someone buying a used car off their lot has to pay sales tax, while someone buying from a stranger does not. HB 480 would give dealers a more level playing field.

However, it would also do something else. While luxury car buyers would get a significant break, that lost revenue would be more than offset by new revenue from taxation of casual sales. In an earlier version of HB 480, with the fee capped at $2,000, the bill was projected to generate over $1 billion in new state revenue over five years.

That money would help ease looming budget deficits that would otherwise force the state to impose teacher furloughs and draconian cuts to services. But let’s at least be honest:

HB 480 is a tax increase on the vast majority of Georgians and a nice tax break for a relative handful.

• Ken Foskett, for the editorial board (kfoskett@ajc.com).