Proposed House bill to end annual car taxes would raise millions for state, local governments

A bill that would do away with annual property taxes on cars, which has been characterized as a boon for disgruntled taxpayers, would actually raise hundreds of millions more each year for the state and local governments.

Under House Bill 480, people wouldn't have to pay tag taxes each year around their birthday. They wouldn't pay sales tax when they buy a car. But they would pay a 7 percent tax each time they change ownership of the car title.

That would net state and local governments more than $450 million more than the current system in fiscal 2010, according to an analysis of the bill, which is scheduled for debate Thursday in the House of Representatives.

"It's a huge tax increase," said House Minority Leader DuBose Porter, who is against the bill.

Supporters dispute that. The change would tax so-called casual sales that don't generate any revenue now, and that will increase the revenues produced.

The new money should be enough to help subsidize emergency room operations and beef up the state's trauma network — long a priority for state leaders — with an infusion of as much as $150 million a year, House Motor Vehicles Chairman Tom Rice said Wednesday.

Currently, when a car dealer sells a vehicle, sales tax is charged and goes to the state and local governments. But when a regular person sells one, it's typically off the books and doesn't produce sales tax revenue.

The buyer still needs to switch the title, though. House Bill 480 would implement a 7 percent fee at that point, capped at a maximum of $2,000. You pay it only once, not every year like with ad valorem taxes.

The average used car is kept for 5-7 years, according to Rice, who supports the bill. If you keep your car that long "you will break even" because you avoid that annual tax, he said.

Rice, R-Norcross, acknowledged the state will see "a revenue increase for sure." But he said that's not a tax increase. It's a tax shift.