Lawmakers are considering changing the way many used cars are taxed when they are purchased, a move that dealers say could add an average of $300 to a customer’s costs.
A financial accounting of House Bill 327, which passed the chamber last year in another measure but stalled in the Georgia Senate, estimated it would increase state and local taxes by $162 million to $178 million next year if it becomes law.
“It is a tax increase for a majority of people working paycheck to paycheck who just can’t afford it,” said Paul John, the CEO of the Georgia Independent Automobile Dealers Association, which represents used-car dealers.
While the aim of the bill sponsored by state Rep. Shaw Blackmon, R-Bonaire, is to standardize the taxing of car sales and eliminate scams by some Georgians selling used cars, the battle pits two political heavyweights in Georgia politics: the new- and used-car dealers’ lobbies.
Some new-car dealers also sell used cars, but their association backs Blackmon’s bill.
Ben Jordan, a lobbyist for the group, called it “an improvement in tax policy.”
House Ways and Means Chairman Jay Powell, R-Camilla, said, “This is a system that treats new-car dealers and used-car dealers the same.”
Under the bill, used-cars buyers would be charged the 7 percent motor vehicle fee on the sales price of the car or truck sold by a dealer or the book value, whichever is higher. Typically, the sales price is higher.
New cars are currently taxed based on sales price, whereas used cars are taxed at the lower book value.
So, if somebody buys a used car for $10,000 and owes the 7 percent tax, but the state book value on the vehicle is $8,000, that person pays the taxes on the $8,000, not on what he or she paid for it. The difference in taxes would be $140 in that scenario.
The fight comes out of changes lawmakers made in 2012 when they eliminated the “birthday tax” — or property taxes — on cars after Georgians buy them. That legislation eliminated sales taxes as well, replacing them with a new title fee. The car dealers’ lobbies had been working to change the system for decades. But new-car dealers weren’t pleased that their customers would pay the fee based on the higher formula while used-car dealers’ customers could use the book value.
People and businesses moving to Georgia and bringing cars here also complained that they had to pay the new title fee as if they were buying their cars anew.
“As in any good legislation, there were unintended consequences,” Blackmon said.
He said his legislation lowers the so-called “welcome to Georgia” title tax to 4 percent of a car’s value.
However, as Tuesday’s initial subcommittee meeting on the bill showed, the positions of the two car dealers’ lobbies on other parts of the bill haven’t changed from last year.
Lee Cavender, a used-car dealer from Gainesville, said the current system works well. Each year since the 2012 bill was passed, he said, used-car sales, and title revenue, have increased.
“I don’t understand why the change,” he said. “It’s good for consumers. Right now the system works.”
But state Rep. David Knight, R-Griffin, a member of the House Ways and Means Committee, said lawmakers never intended to create a system where new-car buyers paid differently than used-car buyers.
“I don’t think we were saying we are going to tax a new car more than a used car,” he said.
Both sides in the battle are traditionally active campaign donors and frequently wine and dine lawmakers.
The new-car dealer’s lobby, for instance, has donated nearly $1 million to candidates since 2006, according to campaign reports. That includes about $31,000 to Lt. Gov. Casey Cagle, the Senate’s president and a leading candidate for governor.
The new-car dealers’ political action committee gave $75,000 to state candidates in the final three months of 2017.
In the months leading up to last year’s legislative session, car dealers — both new and used — also gave about $100,000 to a PAC set up by Cagle’s political team.
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