A smooth ride was expected for legislation to fix an inequity in the state’s new car tax, before its head-on collision with an apparent tax hike of $141 million.
Now, the House and Senate are at odds over process and appearances, even as a Friday deadline approaches for the remedy.
The proposed fix comes 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 flubbed several issues affecting consumers and industry people alike. For instance, it created a double tax on car leases.
In a rush to fix those problems, however, House lawmakers voted for House Bill 80 without determining how much it would cost, although their leadership believed it was revenue-neutral. But senators asked Georgia State University’s fiscal research center for an estimate of the bill’s cost to the state. The answer? HB 80 amounted to a $141 million tax increase.
House leaders say the bill is 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.
But the Senate sees the Georgia State estimate, called a fiscal note, as a deal-breaker.
Instead, it plans to vote Friday on House Bill 266, the result of unexpected changes made Wednesday by the Senate Finance Committee as it inserted language from HB 80 into the unrelated bill to make the legislation revenue-neutral.
The result equaled an old-fashioned switcheroo that angered both bills’ sponsors, House leadership and even some bewildered senators, whose workday started at 8 a.m., two hours before HB 266 had even been formally introduced in their chamber.
After that introduction, the entire Senate immediately stopped work to hold an emergency Finance Committee meeting so the changes could be made to HB 266 and the bill could be reported back to the Senate floor.
“I don’t like getting a piece of paper saying we’ll meet and have a public hearing on a bill that has not been admitted into the Senate,” said Sen. Steve Thompson, a Democrat from Marietta and the chamber’s longest-serving member.
“The only thing it doesn’t say is ‘you will vote for it,’ ” Thompson said of the meeting notice given to Finance Committee members. “I know this bill is important for a lot of folks, but I don’t want to ever be put into this position again. It’s wrong.”
In theory, the speeded-up process could mean final passage by Friday — in time to fix everything wrong with last year’s bill. But that’s only if the House goes along with the Senate changes, and that is far from a sure thing.
House Majority Leader Larry O’Neal, R-Bonaire, said the Senate is scuttling nine months of work on HB 80 on the erroneous assumption the bill is a tax increase.
Calling it a tax increase now is disingenuous, he said, because those taxes were already enacted last year along with a raft of tax credits for various groups as part of House 386, the overhaul of the tax system. HB 80 simply refines certain parts of HB 386, he said.
“It is absolutely not a tax increase,” O’Neal said.
When HB 80 passed the House on Valentine’s Day, it had seemed to please most constituencies: Leasing agents got the double tax removed, rental car companies had a new tax reduced and car dealers won changes in how a car’s value is determined for tax purposes.
One group, however, still felt left out: car dealers who finance loans themselves.
These so-called “buy here, pay here” dealers also lost out last year. These dealers, who typically charge high interest to customers with bad credit, can sell the same car over and over and over. Once a customer defaults on the loan, the car is repossessed, the dealer sells it again and the cycle continues.
But under last year’s bill, and in the version of HB 80 that passed the House this month, those dealers would have to pay a title tax every time the car is sold. They did not like that idea. Having failed to get changes made in the House, these influential dealers went to work on the Senate.
Several Republican senators blasted the bill as a tax increase and vowed to oppose it.
Then some senators turned to HB 266 as a possible solution. The legislation — an annual bill to adjust the state’s tax code to reflect Internal Revenue Service changes — cleared the House on Tuesday. It was considered germane since it also deals with the tax code — never mind it was never intended as a fix for the car tax.
How does the Senate propose to avoid the supposed tax increase? By slightly increasing the state rental car tax while also giving “buy here, pay here” dealers a break: The dealers would pay 2 percentage points less than the normal title tax every time they sell a car.
So, beginning Friday, the title tax for car sales will be 6.5 percent. But if the new HB 266 passes as changed, “buy here, pay here” dealers would only pay 4.5 percent. The change is supposed to make the bill revenue-neutral or even a net tax cut, though there’s one thing worth noting: The Senate has not received a fiscal note on the new HB 266, so senators don’t know how much money they’ve claimed to have saved taxpayers.
They expect to have a fiscal note by Friday, when a floor vote is expected. If HB 266 passes, it would be sent immediately back to the House. In theory, the House could then approve the bill the same day and send it to Gov. Nathan Deal, who could sign it immediately into law to take effect at the same time as last year’s law.
But O’Neal, the House majority leader, said that might not happen. He is not comfortable with how the Senate has defined “buy here, pay here” dealers.
“Anything new to me, I’m reserved until I actually understand it,” he said. “My initial read of it is it has more holes than Swiss cheese.”
More importantly to O’Neal is the original HB 266. Every year the state has to adjust its tax code to reflect changes made by the IRS. Normally, that’s not a big deal. But, he said, Congress failed to pass a tax cut for the 2012 tax year until after New Year’s Day, making HB 266 more important than usual.
The bottom line: Changes in car taxes, passed in 2012, will take effect Friday, whether or not this bill passes by then.
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