New car tax system still a concern for counties

mlee@macon.comMarch 1, 2014 

ATLANTA -- One year after the abolition of the “birthday tax” -- the annual ad valorem tax on cars -- the switch to a one-time sales tax on vehicles has proved a bit of a windfall for some midstate counties and a bust for others.

Houston County, its cities and the school system are the biggest losers, altogether out just more than $1 million after the first eight months of the change compared to their projected take under the old system, according to the Association County Commissioners of Georgia. The group most recently ran the numbers at the end of November.

Houston’s general fund revenue will be about $52 million in the year that ends this July, and County Commissioner Tom McMichael said the tax loss is driving some budget austerity.

“We knew this was going to happen,” he said. “You have to make it up from other sources.”

ACCG came up with its numbers by looking at Department of Revenue figures for sales taxes and car sales, then divvying them by county. Counties were nervous about the change because they used to collect and control the birthday tax.

Macon, Bibb Countty and the county school system were out about $267,000, according to ACCG’s numbers, though Macon-Bibb’s revenue is much larger than Houston’s.

Peach fell about $201,000 in the red in the same period against revenues this year of roughly $15.3 million.

It’s not clear yet if the state and counties collectively will bring in more money under the new tax than they would have under the old system.

The new law taps a new source of revenue, taxing casual used-car sales that don’t involve a dealer. That’s supposed to make up for the loss to counties of birthday tax money.

Overall, the state and counties will split the tax revenue 55 percent to 45 percent this year. The local share will rise in steps to 72 percent by 2022.

The tax rate is set by law to rise to 7 percent next year and stop unless the state isn’t collecting as much cash as it has projected. Not until 2016 will the state look at the data and see if collections match the target.

Month-by-month, some counties alternate between the red and the black.

Twiggs County tips into the negative side of the ledger, $31,000 in the red.

“I really don’t know how it’s going to affect us,” said Twiggs County Commission Chairman Ken Fowler. “If we lose $31,000 a year, I can tell you it will hurt us,” he said. Twiggs’ entire budget last year was about $6.5 million.

In Jones, Crawford and Monroe counties, ACCG math shows a small windfall.

For Jones, it was nearly $56,000, but County Commission Chairman Preston Hawkins is skeptical it will stay that way.

For one, the county is in the black “so far, but I can’t predict the future,” Hawkins said. And two, “it cut down on our SPLOST money,” he said.

It’s a similar case in Houston, said McMichael.

For example, if someone from Twiggs County buys a car in Houston, that person used to pay the sales tax in Houston. Now, the sales tax has to go where the car goes.

Maybe some Crawford residents are buying cars in other counties: it’s nearly $94,000 in the black.

In Monroe County, “we only have one (car dealership), so we may not be the best indicator,” said Mike Bilderback, commission chairman. Monroe also has shown positive results so far, about $173,000 to the good.

Car dealerships, geography or transient residents, it’s not clear what pattern is behind the numbers.

“It creates winners and losers” relative to the old system, said Clint Mueller, legislative director of ACCG.

For the total April through November interval, one in three counties came up losing under the new Title Ad Valorem Tax, or TAVT.

To add to the confusion, the state Legislature is still making changes, and there are ways to game the system.

“Some dealers have brought the trade-in value up to the value of the book and then increased the selling price of the car over the book value, so the TAVT turns to zero,” said state Rep. Tom Rice, R-Norcross, explaining his House Bill 729, which would change that, preventing undervaluation of cars for tax purposes.

The bill, passed by the House Ways and Means Committee on Thursday, carries several TAVT tweaks, like cutting what new Georgia residents have to pay to register their out-of-state cars. Altogether, the bill would cause a $155 million loss to the counties over five years, according to a provisional estimate.

But Rice said that calculation does not take into account as much as $39 million gained annually for at least the first few years from closing loopholes.

House Minority Leader Stacey Abrams, D-Atlanta, remains skeptical.

“We are creating a remarkable set of deficits for our local governments,” she said during the committee debate. “The taxpayers of these local governments are the ones who are held to account if our calculations are incorrect.”

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