The truth about the CA car tax

[fizzana]

Before 1998 the car tax was 2% of the value of the car. Contrary to what everyone believes, Pete Wilson didn't cut the tax in 1998.

The revenues from the car tax all go to local governments such as cities and counties. What Wilson did was create a subsidy to local governments for 2/3s of the tax so that they could lower the amount paid by car owners. The proviso was that the subsidy would be withdrawn without legislative action if the state went into deficit.

Whether Davis should have bit the bullet on this is a moot point but the vehicle tax can only be reduced if the state reinstates the $4.2 billion subsidy to local governments. Local services, particularly police & firefighting will collapse without the $4.2 billion . California either goes into a deeper deficit or other taxes have to be increased.

As it is, the discretionary part of the Calif. budget is so small due to all the mandated spending from various propositions that something has to give and it can't be cuts alone.

When people start waking up to the reality, Arnold's luster will disappear pretty quickly.

[Captain Sunshine]

1. A question

I understand your explanation, but to me the 2% seems low for such an uproar.

In Texas, you still pay sales tax when you BUY a car. Is this 2% tax the annual registration fee (which I just thought of) or is it an additional tax on sales/something else?

I regret my obvious ignorance, but such details have been drowned out by people screaming "CAR TAX EVIL!" at the top of their lungs. I just want to understand why it's so bad.

CS

[fizzana]

4. You still pay sales tax on the purchase of the car

The 2% is an annual tax. The tax does go lower the older the car gets.

For a new car costing $30,000 it works out to $600 which is quite a hit on top of the sales tax.

[WinstonChurchill]

5. We Pay Both a Sales and an Annual Tax

I paid almost 8% sales tax when I purchased a car last summer. Then I get to pay 2% per year each year thereafter. That includes the year you buy oit because you have to register it to get the vehicle license plate.

It amounts to a lot of money.

[Abe Linkman]

2. Another flat ( = regressive, unfair ) tax

A flat tax is an unfair tax. So, the car tax should be abolished or else changed so that it is progressive (fair).

Maybe Californians will rethink the wisdom of spending more on prisons than on education. Perhaps they'll decide they can do without spending so much money on police functions that target victimless law violations, such as drugs, prostitution, and gambling. That alone would leave a more than adequate number of law enforcement officers, would result in less need to keep building more and more gated communities for the poor (jails and prisons), and the over-paid prison guards could be freed to go back to college (even at the state's expense, if need be) and gain an education so that they can become contributors to society, not over-paid zoo keepers.

[Frodo]

3. Well.... yes and no.

It is a "flat tax" in the sense that it is a fixed percentage of the vehicle value... BUT rich and poor don't drive the same type of vehicles. And the increase in vehicle price is not in direct proportion to the increase in income. An increase in salary from 40k to 50k in a year may not effect how much you spend on housing and food, but may dramatically increase the price of the next car you buy.

So the rich still pay more.

[WinstonChurchill]

7. I agree

Less fortunate people driver cheaper and older cars. A better way to handle this might be to eliminate the tax on vehicles that are worth under, say, $15,000

[Capn Sunshine]

13. The tripling of the tax only kicks in at 20,000

so in this sense it's somewhat progresive.

[AP]

14. It is a flat tax.

The richer you are, the lower your marginal value of an additional dollar. A tax which insn't sensitive to your income is taxing a rich person in a way that burdens them less than a poor person, even if the rich person is buying a more expensive car.

Also consider that the rich don't have to chose to buy a more expensive care, whereas,if you're poor, you pretty much have a fixed cost that's going to be hard to go below (and then you get hit with repair costs if you do take a risk on cheap used car, so it all levels off). So, the choice factor makes it even less fair.

Cruz Bustamonte wanted to make it slightly less unfair by making the first 20K of the vehicle's value tax free for everyone. It's not income sensitive, but it would have assured that most poor people wouldn't be paying any sales tax.

[WinstonChurchill]

6. I Hear the Plan is to Restructure the Debt

I think Arnold will push through a change in the law that allows restructuring of the debt on a one-time basis (allowing the state to borrow and grow out of the problem) and instituting a constituional requirement that insures that spending cannot exceed the rate of inflation plus population growth.

Don't be so sure that it's business as usual. If the legislature won't go along, look for Arnold to go over its head and use the referendum process.

[fizzana]

8. They've already issued bonds for about $12-14 billion to

reduce the deficit but I've read that this will probably be struck down by a court.

There are no easy answers.

[Fescue4u]

9. 2% every year? (!)

Ouch, no wonder people were pissed.

As a one time tax 2% would be ok, but damn $400 bucks a year for a $20k car is outrageous.

[SharonAnn]

10. CA is not the only state that does this.

Iowa used to do it and I suppose they still do. Several others do also.

[CoolerKing]

11. Great Article about the car tax in yesterday's LA Times...

http://www.latimes.com/business/la-fi-golden9oct09,1,1030157.story

A snippet:

"Based on this, you would think the car tax was a uniquely cunning attack by the Davis administration on every Californian's divine right to drive. I almost thought so myself, until I learned that it was introduced in 1935. The "vehicle license fee" rose to its long-standing level of 2% of a vehicle's purchase price in the '40s, and was reduced by two-thirds starting in 1999, thanks to legislation backed by then-Gov. Pete Wilson, a Schwarzenegger political guru.

What none of the recall candidates ever answered during the campaign, however, was this fundamental question: What's so bad about the car tax?

The truth is that this is exactly the kind of tax that someone would expect both conservatives and liberals to embrace.

Consider the following virtues, cherished by Tory doctrine. First, the car tax is a flat tax: It's pegged at 2% of a vehicle's value, whether you own a wreck or a Rolls. (The vehicle value on which the 2% is calculated drops annually, starting at the full purchase price and ending at 15% of the original price in the 11th year and thereafter.)"

[Aleesha]

12. Ahnold isn't going to run CA

He doesn't have the intelligence. He was put in CA so the other dirty repubs will be able to fuck it up more, and believe me, they will.
When CA is in a depression, and Ahnold hasn't kept his promises, hopefully, we will be spared all of the whining and crieing of the CA people.
Hope they all starve!

[Capn Sunshine]

15. we're already there Aleesha

so in that sense we have nowhere to go but up. Who knows what the future holds but gropenfurher will assure that it's easier to do busines here if you're a gross polluter or an enegy company, I guarantee it.

Acoording to Grover Norquist, we have a whole bunch of state owned stuff that would be far more benefical (read profitable) in private hands, such as millions of acres of open space and several mineral leases and other natural resources on publicly held land......

[SammyWinstonJack]

16. Well Musclehead did say that he wanted Caleforneea

to look like Texas. That alone should be enough to scared the living daylights out Californians. :scared: Trust me, you don't want your state to "emulate" ours, in any form or fashion. :-(

[Gin]

17. Davis explained that on Larry King......we had the same thing called

personal property tax and it was a yearly bite...a rethug campaigned on getting rid of that tax...he won..he got rid of most of it...and we are deeply in debt.

Warner halted the last of the reduction for a year at least.