Lawmakers waited until the waning hours of the 2018 General Assembly session to cut the levy new state residents pay when they register their cars and to try to fix a car tax system that has shortchanged local governments in recent years.
House Bill 329, which was sent to Gov. Nathan Deal's desk for his consideration, is only the latest bid by lawmakers to remake state law mandating how Georgia vehicles are taxed.
"Is there any possibility we can ever anticipate having a session of the Georgia General Assembly without having some version of this bill before us?" state Sen. Nan Orrock, D-Atlanta, asked on the final night of the session. "I think we are at six years and counting."
State Senate Finance Chairman Chuck Hufstetler, R-Rome, who presented HB 329 to his chamber, responded, "I think this will be continuing for years."
The seemingly annual vehicle tax measures began appearing in 2012, when the General Assembly revamped the car levy system.
Before the 2012 change, Georgians paid annual property taxes on vehicles and sales taxes on purchases if they bought from dealers. Under the “new” system legislators approved, car buyers pay a title tax, whether they buy from a dealer of their next-door neighbor, a change the politically powerful car dealers lobby had been fighting to have passed for decades.
Vehicle owners also pay a title tax when they move in from another state and register their cars.
Georgians who haven’t bought a car since the change continue to pay property taxes, which have long been called the “birthday tax” because they are due on the owner’s birthday. No property taxes are paid on cars — new or used — once they are purchased and titled.
While car dealers loved the change — the value of car and truck sales has risen — the original legislation created a host of issues, such as how to tax leased autos and new residents and how the state should share the revenue it collected with cities, counties and school districts.
Lawmakers hoped leasing issues were resolved in a bill last year. HB 329, if signed into law by Deal, will cut the rate new residents pay — the so-called “welcome to Georgia tax” — from 7 percent of the value of their car to 3 percent.
Cities, counties and school districts are also hoping the bill creates a fairer sharing of car tax money paid into the state.
A Georgia State University analysis last fall found that tax revenue declined in more than half of Georgia's counties in the years after the change. State government, meanwhile, wound up with a windfall, taking in about $1 billion in 2016.
One of the reasons: A phasing out of property taxes had almost no effect on the state because virtually all property taxes were collected by local governments.
Because Georgians who bought cars no longer had to pay property taxes, the amount of vehicle property taxes collected by local governments declined from $811 million in 2012 to $280 million in 2016, the report said. That figure is expected to continue to fall as Georgians buy vehicles.
What that means is less money for many cities, counties and school districts than they received from car taxes in 2012.
The state and local governments share the title tax money, but the split has been good for the state’s treasury and not so good for anybody else.
Local government lobbyists have complained about the split in the past, and they were on board with what House members proposed. The Senate changed the bill, and local government officials, school districts and even MARTA said they’d lose millions of dollars under the chamber’s proposal.
Gwinnett County school officials, for instance, initially said the Senate version of the bill would cost the district $9 million a year.
In the end, House and Senate negotiators worked out a deal that local government officials say will result in a more equitable sharing of car tax money — with cities, counties and school districts receiving 65 percent of the revenue from the tax.
“When it was all said and done, our group was satisfied,” said Chuck Clay, a lobbyist who represents Cobb County schools and the Georgia Education Coalition.
However, HB 329 is unlikely to be the last effort to make “fixes” to the 2012 law.
One of the most hotly contested issues the past few years involves new-car dealers trying to get the state to tax used cars on the same basis as new vehicles.
The House has proposed — as part of a 2012 law "fix" — a provision to charge used-car buyers the state's motor vehicle tax based on the sales price of the car or truck sold by a dealer.
New cars are currently taxed based on sales price, whereas used cars are taxed at the “book value.” Used-car lobbyists say the “book value” is usually less than the sales price.
So, if somebody buys a used car for $10,000 and owes the current 7 percent tax, but the state values the vehicle at $8,000, that person pays the taxes on the $8,000, not on what he or she paid for it. The difference in taxes in that scenario would be $140.
New-car dealers — who also sell about 40 percent of used cars in the state — have lobbied the past few years to see the state use the same basis — the sales price — for taxing both new and used cars. The House supported the change, but the Senate hasn't.
The provision was removed from the bill by the Senate Finance Committee in the final weeks of the session.
In the end, the measure's sponsor, state Rep. Shaw Blackmon, R-Bonaire, said, "The new- and used-car dealers are both in support of the (final) bill."
That’s likely only temporary, and the battle is expected to be renewed in January, when lawmakers return for another session.
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