By on April 2, 2012

Courtesy of photobucket.com

 

Taxes and fees are the pedal and the metal of state governments. Without em’, all you would be looking at is a bunch of big buildings with no one doing anything in them.

Most police cars would be busy hiding out in secret hideaways awaiting the next revenue source. Property taxes would go way up. Appraisals for those properties wouldn’t follow market realities, and the state and county governments would be busy up trying to drum up every pork barrel budget possible from the Federal government. From airports with no aviation traffic. To winding roads that lead to the eternal fountain of no accountability.

But then again, my kids need to be educated. Roads and sewers fall apart. Bad guys (and girls) need to be put away and rehabilitated.  Parks need to be protected. The roads need to be repaired. Restaurants need to be hygenic.  Fire departments. Libraries. Electric power. Water.  Disaster relief…. and dare I say it… health care. That last one is a real big issue for a lot of folks.

How does the government pay for it all? Simple. By trying to be fair. Stop laughing.

Here in Georgia we just passed a new bill. House Bill 386 removes the Casual Sales Tax Exemption for individuals buying and selling vehicles between each other.

This means two things. First, Georgia and Vermont now have one less thing in common. Second, a lot of Good Ol’ Boys are going to get real ticked off when they find out that the government has officially treated their personal property as financial collateral.

“This ain’t fair!”, will be the battle cry from Atlanta’s pleasant valley suburbias, to the hinterlands of Deliverance country. “They can’t tax me! Why I’ll just lower the sales amount so that it won’t seem like so much.”

It won’t matter. The Georgia Independent Auto Dealers Association (which I am a proud member of) put it all in black and white.

” Sales Tax on vehicle purchases will be replaced with a “Title Fee” which will start at 6.5% in 2013, 6.75% in 2014 and 7% in 2015. There is a 2% option to use if necessary after that time. The calculation will be determined by the “fair market value” of the vehicle, not by the “selling price.” Again, the new Title Fee will replace the Sales Tax, not add to it.”

So you want a title and tag for the vehicle? Great! Pay the same money as everyone else.

Don’t want to pay your share of the $150 million in estimated proceeds? Enjoy your new museum piece.

You would think that this battle encouraged a lot of debate since it effectively results in a nine-figure tax bump. Nope. It passed 54-0 in the Senate. No objections and no abstentions.

And you know why? Because it’s fair… to a degree.

 

First off it’s fair for the government. Everyone and their uncle tries to get out of paying taxes. Don’t believe me? About a third of my calls from interested buyers eventually come with the following question.

“Do I have to pay sales tax?”

“Why yes you do!” Even if I cut my price, you still have to pay a car dealer for a retail transaction.

So what ends up happening from my personal several hundred dollar disadvantage? A lot of things. First, people hang up the phone or start nickeling me down from the get go. That’s a cost that comes with selling a product that millions of other people happen to already have on their driveways… and I’m OK with that.

Second, many car buyers at the auctions become curbstoners. They put their vehicles on a variety of corner lots and busy intersections. They then put the titles in the names of their wives, uncles, cousins and random people in the phone book. Or better yet, they just keep the title ‘open’ in the prior owner’s name.

Every person can buy or sell five vehicles a year in the state of Georgia without being taxed or licensed for the privilege. Play your cars right and you can make thousands of dollars tax free. Play other people’s cars right and you can get tens of thousands of dollars tax free.

So you buy the car from the so-called private party. And then what happens after the transaction?  You may find the vehicle breaks down, has flood damage, electrical issues aplenty, or is a rolling deathtrap. Sound too extreme? It happens here all the time.

Vehicles that have been impounded by the local tow company and sold at auction are an exceptionally nice target since the state doesn’t require the vehicle to be immediately titled. Even if they did, the transaction would be legal unless you could prove that the ‘individual’ knew of the salvage history.

These illegal transactions number well into the tens of thousands of vehicles. They cost the public and the state government tens of millions of dollars.

Dealers and the public also have an opportunity to cheat. Lower ‘transactions’ on bills of sale results in lower taxes collected by the state government for that transaction. It also results in more money that needs to be collected from everyone else.

The current tax policy for automobiles that has been developed in Georgia is fair from where I stand because it…

1) Treats everyone the same.

2) Eliminates most of the freeloading and ‘cheating’ issues related to collecting sales tax.

3) Puts the burden of payment squarely on the car buyer.

Sorry, but my job is not to pay your sales tax. It also shouldn’t be the job of anyone else.

Disagree with me? Then let me know of a better plan.

 

 

 

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51 Comments on “Hammer Time: Read My Lips!...”


  • avatar
    bucksnort

    Tax, tax, tax; spend, spend, spend.

    • 0 avatar
      Banger

      Did you even RTFA?

      My home state of Tennessee bases the taxes on the “sale price,” but some county clerks will scrutinize you if you appear to have got too good of a deal. Of course, if you’re a good ol’ boy and know the court clerk real well, you might not be scrutinized as much as the next guy. At least that’s how it goes in my small county. Larger counties probably don’t have that issue as much as we smaller ones do. Still, the system is rife with opportunities for abuse and tax evasion.

      Georgia sounds like they’ve done a fair thing here, IMHO. Glad to hear about this from Mr. Lang. Kind of wish Tennessee would take a similar approach.

      • 0 avatar
        noxioux

        And why is it their business how good a deal you got?

        Really, you people who think that the government has some kind of tacit right to take whatever they want, or whatever they think is “fair” are up in the night. They have no more inherent right to a share of your personal property than any other thief.

        Fact is, the city, county, state and federal governments are dismal stewards of that money. No one with a sane brain cell in their skull can call any government entity “fiscally responsible.” Allowing them more secure revenue streams with fewer loopholes, in the name of fairness, is the last thing anyone needs.

      • 0 avatar
        unartisticinc

        I’m not sure there’s anyone who thinks that the “government has some kind of tacit right to take whatever they want”. I think the fact that we spend so much time reading a web site about cars is probably indicative of what kind of stewards we are with our own money… and that’s just for starters. It couldn’t possibly be that most government employees are just like everyone else? Trying to make the best of things… Elected officials are different animals, but then there is that matter of how they get voted into office.

      • 0 avatar
        Banger

        “And why is it their business how good a deal you got?”

        It becomes their business when, as many people do here, you report you bought a $5,000 car for $500. Then, they look it up and have the right to tax you according to the average sale price of said make, model, and year. The popular tax-dodging tactic works better in some locales (and for some well-connected people) than others. A system that mixed the Tennessee system with a few of the more fair Georgia ideas would probably work fairly well without overly punishing anyone. Exemptions for family transfers, charity giving, and the like obviously need to be part of any used car sales tax scheme, because in those types of transactions, profit is clearly not the motive. But I think if we’re going to have a sales tax on car sales, I want it applied fairly to everyone, therefore I want a system that doesn’t allow any good ole’ boys to wink at the county clerk and get a pass on his true taxes due when he falsely reports the sale amount at some number that in no way resembles the actual sale price of the car.

        All the talk in this comments thread about sales taxes being regressive? Preaching to the choir. We have sales tax and only sales tax in Tennessee. There is no income tax. They tried passing that a decade or more ago, and conservatives statewide were up in arms. Nevermind the fact a progressive (sorry, is that a dirty word?) income tax and an abolishment of sales taxes (especially on groceries) would have been a money-saving move for more than half the state’s population.

    • 0 avatar
      Tree Trunk

      Now that is an excellent plan for a balanced budget much better than the republican

      tax, tax cut, tax cut, spend, spend, spend

      or the democratic

      tax, tax, tax, spend, spend, spend, spend.

  • avatar
    nikita

    California’s “Use Tax” takes care of the sales tax issue for private transactions, with an exception for transfers among family members. It is collected along with the transfer fee by the DMV. Sales price is asked for, but there is some auditing for fraud. How does GA determine “fair market value”? For a late model car, with clean title and no damage, it may be possible, but what about everything else?

    • 0 avatar
      Steven Lang

      I don’t know. This legislation is going to take a year to go through and with that, there will be plenty of compromises and loopholes that will inevitably become law.

  • avatar
    skor

    A self-serve junkyard that I patronized had a sign hanging over the wall behind the counter so all the customers could see. It read: “We don’t CHARGE sales tax, we COLLECT sales tax. DON’T EVEN ASK!”

    Speaking of amusing signs at car type businesses, an independent car parts seller had the following sign posted: “Make sure brain is in gear before engaging mouth.”

  • avatar
    Bill Wade

    Here’s what is wrong with this and I predict it will be stricken. Kansas decided to use FMV instead of selling price to collect sales tax. This resulted in quite a bit of justified grumbling.

    This is what happened to me. I sold a Chevy pickup truck I used in my business to a neighbor kid for $250. Now keep in mind this vehicle had over 400k miles, there wasn’t a straight piece of metal on it and it had serious rust. When Kansas passed this regulation there was no provision of any kind to have a vehicle appraised. The kid called my up from the DMV because they wanted to charge him almost $700 in sales tax.

    I drove down there and talked to the appraiser. He said there was no deviation. Well, I handed the kid his $250 back, tore up the bill of sale, wrote a new transfer of vehicle as a gift to him and walked out the door. The state received no sales tax revenue.

    This kind of stuff needs to be examined versus basically saying too bad, this is what it is.

    On another note, what’s fair about paying sales taxes repeatedly on something sales tax has already been paid on?

    • 0 avatar
      ClutchCarGo

      “On another note, what’s fair about paying sales taxes repeatedly on something sales tax has already been paid on?”

      Sales tax is a tax on a business transaction, not on the property. Therefore, it is due each time a sale takes place. If it were a VAT there would presumably be no tax due on any but the original sale.

      You’re right about the FMV, tho. It seems like such a plan would require a signed bill of sale between the buyer and seller, signed and notarized, with penalties for lying about the transaction.

  • avatar
    parabellum2000

    I really think this needs an exception for family members. I gave my mom my 2001 Acura TL with 150,000 miles. It was on its 3rd transmission (Honda had tons of problems with those transmissions) at the time the true market value would have been between $3,000 and $8,000 dollars. I’ve seen similar cars selling in this crazy market for $12,000.

    At the time, if she has registered it as a gift, she would have had to pay a tax based on the market value of the car and claim it on her taxes. I sold it to her for $1 and she had to pay 6 cents in tax.

    She is still driving the car 5 years later only now hit 160,000 miles. I don’t think the state should get to tax you for looking out for your family members.

  • avatar
    Dr. Kenneth Noisewater

    Delaware allegedly has no sales tax, but they do have a fee like this, I believe it’s 4% or thereabouts.

    DE also has a gross receipts tax that is passed onto consumers thru higher prices, so it does have sales tax, it’s just not collected at the retail-end transaction, but rather baked in the cake.

  • avatar
    DC Bruce

    I don’t think your state’s resolution is all that unusual. I believe the states in my area (although it’s been a long while since I lived in Virginia)charge a registration fee equal to the “Blue Book” (or some “book”) value of your car, but if you can provide a receipt that shows you paid sales tax, then you just pay the difference (if any). Also, there’s some sort of cooperative arrangement among the 3 jurisdictions (DC, Maryland and Virginia) allowing car dealers to register the car in the buyer’s jurisdiction regardless of where in the three jurisdictions the dealer is located. The dealer collects the sales tax for the jurisdiction (of the 3) where the car is going to be titled and, I believe (since I’ve only bought one used car and it was through a dealer) the sales tax on the purchase price is accepted as the registration fee without regard to the “Blue Book.” Some really nice states allow you to get credit for the sales tax you paid in another state, too. When I moved from Texas to Virginia with a car I had purchased new in Texas, upon producing the receipt from the Texas dealer, I didn’t have to pay any ad valorem tax to register the car in Virginia. Maryland, however, is not so nice. They want the money, as I found out when I moved from DC to Maryland.

  • avatar
    turbosaab

    >> Then let me know of a better plan.

    Better plan = no sales tax.

    • 0 avatar
      jmo2

      Economically sales and VAT taxes are much more efficient than taxes on working and investing.

      • 0 avatar
        aristurtle

        On the contrary, sales taxes are one of the more regressive forms of taxation currently in use; sales taxes on used cars particularly so.

        My state (MD) has a similar system: for private party vehicle sales, you pay the sales tax when you register the car with the DMV. It’s based on the purchase price (and requires the bill of sale be notarized if the vehicle is less than seven years old AND the sale price is $500+ less than bluebook), but there’s a floor — which my first hoopty-ass car was well under, so I, and people with similarly cheap cars, paid a higher percentage of tax than an expensive car would have cost.

      • 0 avatar
        darkwing

        “Regressive” and “inefficient” are not mutually exclusive. In fact, this form of consumption tax is as fair as it gets.

        You just don’t want to pay your fair share.

  • avatar
    sportyaccordy

    Change will have to be holistic. Ditch all transaction taxes as well as goofy deductions and credits. Make all tax income tax. Make handing over of cars clear practice (i.e. a junk/salvage yard can’t take a car in or let a car go without transferring titles- when available). Proceeds from transactions would be taxed on seller as income. Bada bing bada boom.

  • avatar
    Nate

    Steve,

    Even though I’m a mouth-breather from “Deliverance country” as you so eloquently put it, I can actually read. This is only fair for car dealers. Since you are in fact a car dealer, I don’t fault you too much for supporting it. However, as Bill Wade stated above, sales tax has already been paid on a used vehicle. Why should it have to be paid over and over again if sold between individuals?

    I realize curbstoning is a serious problem as well, and as someone who spent months looking for a used vehicle and dealt with dozens of these people, I can say that something needs to be done. I don’t think this was the right solution though. Also, speaking of children needing to be educated, you forgot to mention that under the old system the local counties kept the money from the Birthday Tax. With the new bill, it will be collected by the state and the counties will be “reimbursed” for the lost revenue. Any room for shenanigans there, you think?

  • avatar
    moedaman

    “Without em’, all you would be looking at is a bunch of big buildings with no one doing anything in them.”

    This is already the case!

    To be honest though, the federal government employees I work with have this kind of work breakdown.

    25% do 50% of the work.

    50% do the other 50% of the work.

    And the remaining 25% do absolutely nothing, but are well protected. And if they get called out on it from their boss, the boss is the one who gets in trouble.

    I always pray that I don’t get an assignement with one of the bottom 25%.

  • avatar
    MarkP

    “Fair” is in the eye of the beholder. I understand your viewpoint here, but this is a new tax, which is kind of an odd thing for a Republican-no-taxes government like Georgia has. But it’s a new tax that benefits businesses at the expense of individuals, so that’s OK. Is there a better way to finance government? Sure. Increase the income tax in a graduated fashion. Now you can start laughing again.

    • 0 avatar
      darkwing

      But isn’t that also pro-business? And therefore, by your logic, evil, Republican, regressive, etc.?

      If you’re going to demagogue, the least you can do is be internally consistent about it.

      • 0 avatar
        mike978

        How was Mark demagoging? He merely made a suggestion on how to finance government. I don`t believe I read the words “evil” or “regressive” in his original comment.

      • 0 avatar
        darkwing

        “Republican-no-taxes government…. But it’s a new tax that benefits businesses at the expense of individuals, so that’s OK.”

        How is that not demagoguery?

      • 0 avatar
        MarkP

        Are you saying that a progressive income tax is pro-business? That is totally at odds with the reality that I live in. A progressive income tax is neither pro- nor anti-business; it is simply fair.

        Also, what part of what I said is not true? Anything? The governor of Georgia is a Republican. The majority in the General Assembly are Republicans. Republicans are in general opposed to taxes, especially new taxes. This law is a new tax that benefits business by eliminating an advantage that a private individual had when selling a vehicle; therefore, it benefits business at the expense of individuals, who will now have to pay more for a car they buy from an individual. So I have to conclude that your definition of demagoguery is “speaking the truth.”

      • 0 avatar
        darkwing

        “This law is a new tax that benefits business…”
        “…therefore, it benefits business at the expense of individuals…”

        These are opinions, not facts. And not even particularly well thought-out opinions, but merely partisan spin. Even though you disagree with Steve, he was at least honest enough to present his opinion as such, and support it with an argument. Your approach is to simply *declare* your opinion to be true, and to yell at anyone who disagrees with you. Telling, but hardly convincing.

        Really, all you’re saying here is that you choose to interpret the actions of Republican governments in a pro-business, anti-individual way. If this were news coming out of a blue state, you’d no doubt be congratulating the state government for protecting its vulnerable citizens from curbstoners, and demonizing those opposed as being anti-fairness and pro-fraud.

      • 0 avatar
        MarkP

        This seems pretty simple to me. A new tax is levied. That tax applies only to individuals who sell a vehicle. That tax reduces or eliminates an advantage that an individual had, relative to a dealer, when selling an identical vehicle. This benefits the dealer because it lets him compete on price with an individual. You could call this “leveling the playing field” if you want to, and you could argue that it’s a good thing for everyone, including businesses, individuals and unicorns. But nevertheless, it benefits business at the expense of the individual. What’s so hard to understand about that?

        Again I have to point out that everything I said, including the fact that Republicans control the state government in Georgia, is a fact, not an opinion. I didn’t say they were evil, and I’m not sure why you think calling someone a Republican is equivalent to calling them evil.

      • 0 avatar
        darkwing

        Well, of course it seems simple to *you* — you decide whether a new measure is pro- or anti-business, or pro- or anti-consumer, based on the little letter after the sponsor’s name. It’s rather easier than what most of the rest of us try to do, which is to think about the details of the matter in question a bit before casting judgment.

        Here’s a simple example: you say the measure “benefits business at the expense of the individual”. Yet that’s clearly not true, because the new fee isn’t a zero-sum game: the newly collected funds are being kept by the government, not given back to businesses. In other words, you’re double-counting. (I certainly hope you’re not an accountant…)

        I fully expect that appeal to reason to fail, though, because as you’ve demonstrated, if it’s a Republican measure, it must therefore be pro-business, reality be damned. I’m unsure, though, if this is merely due to ideological stubbornness on your part, or if you’re truly unable to perceive opinions other than your own.

        For the record, I understand your point just fine; which is why I was able to demonstrate that you’re incorrect. Your inability to do so yourself, other than to insistently repeat “no, I’m right”, is quite telling.

      • 0 avatar
        MarkP

        Ad-hominem attacks don’t really explain anything. I have to conclude that you are wearing political blinders and I bow out of this discussion.

      • 0 avatar
        darkwing

        Yes, and I’m sure your inability to defend, or even articulate, your argument beyond “no, I’m right” has nothing to do with it…

        Oh, and by the way, thanks for proving my original point correct. You said repeatedly that taxes on individuals are automatically pro-business (which is incorrect, but apparently a core part of your dogma). Therefore, personal income taxes benefit business as well…and your response to a supposedly pro-business measure is…to institute yet another pro-business tax measure. As I said, internally inconsistent.

        Toodles!

  • avatar
    bucksnort

    There is always an excuse for more taxes.

    However, I am sure in this case, Mr. Lang has determined there is absolutely no wasteful spending anywhere in the GA state budget…no inefficient bureaucracies, fat public employee pensions, mindless projects, inept school boards, college professors, public school teachers. Nope, GA is the most efficient place in the nation and needs this tax to be “fair.”

    In my state, the first year, they take it off MSRP which nobody actually pays for the vehicle. After that, it is a sliding percentage scale based on the MSRP. So, to be “fair,” a lot of people take care of their cars and drive them to the 9 year point where the tax drops to a low, double digit fixed amount. I wonder if there is any data on auto sales taxes and penalties versus new car purchase rates and age of cars on the road? But, hey, who wants to look at data before deciding to raise taxes? At least here, there is a small but vocal group of legislators lobbying to drop the tax. But, of course, they need it to pay for projects like the “bridges to nowhere” near my house….three fancy, flyover type, structures that end in a dirt hillside because the morons at the DOT failed to get eminent domain for the ranch above they needed to connect the a highway to the bridges. I could be wrong though…that could have been free Obama money.

    • 0 avatar
      kilgoretrout

      What’s your “better plan” then? This is just complaining. I’m sure you’ve thought of a solution that eliminates the imperfect nature of institutions and human beings. Let’s hear it.

  • avatar
    50merc

    “To tax and be fair, no more than to love and be wise, is not given to men.”
    Looks like Georgia is moving toward the system Oklahoma has long used. Okies like to say there is no sales tax here on cars, just “excise tax”. I doubt even one in ten people know excise tax is another name for sales tax. On used cars, the state asks for the purchase price and then decides whether that amount is within 20% of the “average retail price” (apparently per NADA) for such a vehicle. If it is, the tax is based on the declared purchase price. If not, the state uses the book amount. No allowance is made for condition. If you’ve just bought a junker that was hauled out of a lake, you’ll pay too much.
    Oklahoma is home to several Indian tribes that issue car tags to their officially recognized members. With such a tag no State of Oklahoma tag is needed. (The tribes can do that because they are sovereign governments–as in the name “Cherokee Nation”.) I doubt the tribes charge as much as the Oklahoma Tax Commission, but it’s a moot point for me.
    For decades the biggest racket in Oklahoma motor vehicle taxation was so-called “commercial vehicle” tags. An ordinary car or pickup that the owner declared was a “commercial vehicle” was subject to a tiny fraction of the usual tax. That has been mostly, but not entirely, cleaned up. When I worked at the Capitol I saw a good number of cars in legislator parking spaces bearing “commercial vehicle” tags.

    • 0 avatar
      aristurtle

      Here it’s “historic vehicle”. Anything older than 15 years old can get “historic” tags at a steep discount over normal ones if you can say with a straight face that it’s not your daily driver. Historic vehicles are also exempt from safety and emissions testing. Once, I saw “historic” tags on a beautifully reconditioned 1955 Oldsmobile 98. I’ve also seen them on literally countless nearly-dead pickup trucks held together with duct tape, zipties, and JB Weld, hauling loads of scavenged scrap metal.

    • 0 avatar
      krhodes1

      Maine gets you coming and going. There is a 5% sales tax based on the selling price that goes to the state. Then there is ALSO an annual Excise Tax based on original MSRP (NOT FMV) that goes to your local town. So you get the crazy situation that a rusty old ’88 MB 300TE will cost you $300+ to register (because it cost $45K new), while a mint condition 5yo Corolla will cost you $120 to register (because it cost $10K new).

      Gets steep on new cars, my 328iT was $1200 to register the first year, and another $900 the second. The Excise tax does decline every year for 7 years, but never goes away.

      And no breaks for commercial or antique registration. Antique gets you out of the annual safety inspection though.

  • avatar
    lahru

    The State of Georgia is leveling the playing field amongst used car sellers, dealers and curbers alike. That is actually good for consumers like Steve has said, in that most dealers have to declare if the used car is being sold with a warranty or not and allows the better dealers that sell with warranties to most likely collect a higher sale price than the curbers and those that sell “recon wrecks” as we up north call’em and the macro effect is higher tax revenue for the state.

    The statements regarding inefficient use of tax dollars should be addressed in another forum.

  • avatar
    burgersandbeer

    MA assesses sales tax based on NADA “clean” trade-in-value or the actual transaction price, whichever is higher. The exception is salvage titles, in which case sales tax is based on the transaction price.

    There is also an exemption for family transfers.

    I’m sure the theory is to make sure they get their share if you pay more than NADA suggests buying something heavily modified. In practice, the commonwealth is more than happy to rip you off if you admit to paying over NADA value.

  • avatar
    Halftruth

    Right, so anyone that sells a car for any reason needs to compete and be on par with car dealers? Gimme a break.. UCD’s made the same complaint up this way (NH) awhile ago. One used car sale does not a dealer make. And as far as the surprise that it passed 54-0? Big shocker there. Let me vote when playing with other people’s money.

    I think 7 percent is alot of cake to throw down when buying a car.
    Thankfully NH does not have that craziness yet. They did have a reg surcharge but that was dropped this past year.

  • avatar
    Educator(of teachers)Dan

    If men were Angels or Angels could govern men, government would be un-needed.

    Till then…

  • avatar
    TW4

    The title fee is not about fairness. The fee is about a group of politicians who are raising taxes b/c they are too weak to justify cuts somewhere else. The title fee is about auto lobbyists who want to make new cars look relatively more appealing to buyers, and a journalist who’s asleep at the switch or acting as errand boy.

    Sales tax, by any name, is regressive as a proportion of income. Furthermore, a vast majority of used sales between non-profit seeking individuals are not taxed. Some states say they should be taxed, but enforcement is more expensive than the benefit. Some states put voluntary sales tax lines on their income tax returns for untaxed goods. That’s about as rough as they will get with you.

    Basically Georgia is giving itself the right to place an enormous tax on the citizenry, a tax that will disproportionately affect lower income individuals and restrict their access to transportation (thus, work). Though this is not politically correct to say, lower-income individuals tend not to be savvy regarding government compliance. The tax will likely increase the incidence unintended unregistered vehicles and fraud, which will lead to criminal prosecutions of lower-income individuals for victimless crimes. Imprisonment, law enforcement, and legal costs will be paid by society. What do auto dealers care? Poor people and young people aren’t their customers.

    Maintaining a sales/title tax on used auto sales is one thing (the market has adjusted), but introducing a big regressive tax is destructive, unless it is phased in over several decades.

    If a title fee must be introduced, it could be stratified over time. For instance, the fee is 7% at year 0, 6% after 1 year of title, and so on. Dealer sales are always subject to 7% (as it is now, I presume). Lower income buyers who shop for cars (7 years old) pay no tax. Yeah, some yuppster just got a 2005 BMW 3-series in a private transaction without paying tax, but, more importantly, young drivers and poorly educated working class can travel more easily without becoming a burden to the general populace.

    The only way the title fee can work in its current guise is if the FMV calculations artificially suppress the value of old economy cars to reduce the tax burden on lower-income. But suppressing FMV is not transparent, nor does it give lower income individuals assurance that the government is not going to raise their taxes when convenient and without warning or legislative due process.

    This is basically a bad tax, and a huge power grab (FMV calculations) by the Georgia legislature to satisfy auto dealerships. No telling how long the bill has been in the pipeline, but auto dealerships are pushing it through even though the market is recovering. Sadistic.

    • 0 avatar
      Steven Lang

      Normally I ignore these types of posts. But despite the unworthy insults and the ‘holier than thou’ flaming, you do bring on a few interesting assumptions.

      “If a title fee must be introduced, it could be stratified over time. For instance, the fee is 7% at year 0, 6% after 1 year of title, and so on. Dealer sales are always subject to 7% (as it is now, I presume).”

      Vehicles that are financed will not require that the 7% paid in full all at once. Instead, the amount of the title fee will be paid incrementally over time.

      Let’s say the title fee is $104 and the finance arrangement is for two years. The dealer will be responsible for collecting $1 a week and having this money forwarded to the state government on a monthly basis.

      “Though this is not politically correct to say, lower-income individuals tend not to be savvy regarding government compliance. The tax will likely increase the incidence unintended unregistered vehicles and fraud, which will lead to criminal prosecutions of lower-income individuals for victimless crimes.”

      Not true at all. In cash deals, it is the responsibility of the dealer to collect the title fee on the day of sale. Furthermore the state already authorizes counties to issue extensions on temporary tags. To be blunt, the only debtors prison that exists in our country is the one you invented out of thin air.

      “If a title fee must be introduced, it could be stratified over time. For instance, the fee is 7% at year 0, 6% after 1 year of title, and so on. Dealer sales are always subject to 7% (as it is now, I presume). Lower income buyers who shop for cars (7 years old) pay no tax.”

      This is a one time fee that reflects sales tax. It is not annual or recurring.

      One other thing. If you bothered to read my article AND click the Youtube video, you would notice that I brought a dissenting viewpoint to the Best & Brightest.

      Instead of engaging in nasty behavior, I would appreciate it if you acted decently to folks who disagree with you. Life is too short for name calling.

      In addition I strongly believe, based on my experiences as a car dealer, that this new law is highly beneficial for poor people because it discourages curbstoning. Those entities, almost to a man prey on the poor and the uninformed.

      Finally, I do want all people to avoid making bad financial decisions. Rich or poor, doesn’t matter. That’s why I spend so much of my time here writing about how to keep and maintain cars for the long run.

      • 0 avatar
        TW4

        Steven, you’re supporting $150M in regressive sales taxes on the secondary car market at the behest of an auto dealership organization without a phase-in period. Worse, the target of the regressive tax is casual middle class buyers/sellers. Worse still, the cars of today will probably have higher operating costs compared to vehicles built in accordance with CAFE 2025. The lower-income will likely be paying higher regressive taxes on vehicles with higher operating costs. Worst of all, the ad valorem tax is being phased out over 10 years so car owners and buyers will get double-dipped for 10 years as the title tax is abruptly introduced and the birthday tax is slowly phased out. You support tax chicanery b/c you believe it will be good for business. I’m behaving nastily? More likely that you are not self-aware b/c your opinion fits within the mainstream.

        Young Turks is not dissenting opinion, either. He’s an angry liberal, stuck in the make-believe world of politics, bashing every “conservative agenda” he can find. He happens to be in the ballpark on this issue, but I have economics degrees, and I don’t change my opinion based upon the party making the proposal. Young Turks is of little use.

        Perhaps it is unfair that casual sales are not taxed in Georgia, but no one in their right mind would levee a $150M tax during a recession on one good in one marketplace, populated primarily by middle class citizens, without phasing-in. The title tax is so obviously a legislative drive-by on the casual sales market, it beggars belief that the details would be made public. The justification for the tax is not given as an intelligent matter of policy, but as fairness, public safety and “axe the birthday tax”. If those are the justifications, this is obviously a revenue grab, power grab, and crony-capitalism.

        Perfect time to ram this through b/c the car market is recovering so legislators can claim that this tax created jobs at dealerships. As the average age of cars declines (pre-2007 levels) during the recovery, tax receipts skyrocket. Yahooooo! A tax gusher built on the backs of the middle class. Best of all, if sales traffic is not redirected to dealerships, the government still gets their revenue from casual sales tax. But you don’t feel slighted b/c legislators probably told you that they would tax you harder to make up the shortfall if you didn’t tax your fellow citizens. Never learned prisoners’ dilemma, did you?

        Regardless of my profession, politics, or morals, I would never support this tax program. This is not how governments widen the tax base. If you’re going to raise middle class taxes on transportation, at least have the decency to phase-in. Instead, Georgia will double tax for 10 years.

        Furthermore, title fee or sales tax is generally paid every time the vehicle is sold or retitled for a new owner. Phasing out the tax based upon the age of the vehicle would allow lower-income buyers to avoid taxes on older vehicles bought through casual sales. A humane loophole, imo. Maybe phase it out for dealers, too, so they no longer have an incentive so sell out their fellow Georgians.

  • avatar
    SherbornSean

    So much whining about taxes, so little thought about how to pay for all these roads everyone seems to like driving on so much.

  • avatar
    eventualhorizon

    I’m not sure why there are so many objections to this. This law mainly benefits the state and car dealers but it isn’t that bad for the car buyers either. I believe that sales tax was required to be paid in private party car sales before but it was impossible to collect. Steven’s bullet points are spot on. Everyone gets treated the same.

    The removal of the ad velorem ‘birthday tax’ is a great counterpoint to the new title fee. In the past you had the joy of paying 7% sales tax (at the dealer) + the fun of the annual ad velorem bill. I live in the city of Atlanta so my ad velorem rate might be a bit high but I am pretty sure that I’ve more than paid an additional 7% in annual fees for my cars.

    • 0 avatar
      Banger

      ^ This. Whenever I buy or sell a vehicle, I pay the taxes I’m supposed to pay by law. But here in Tennessee, quite a few people skirt around the tax by falsely reporting the purchase price. It’s more or less impossible to hold them accountable because unless the court clerk charged with collecting the tax was there when the sale was made, he or she has no way of knowing how much the buyer owes in taxes. As eventualhorizon said, impossible to collect, at least in a fair, consistent amount.

      • 0 avatar
        MarkP

        Banger: My brother, who lived in Chattanooga, bought my old VW, which was pretty much on its last legs then. He later sold it to someone who really, really needed transportation, at a really low, but entirely justified price. The tag office wouldn’t accept the actual sale price but instead charged at a significantly higher rate. I have no idea how often that kind of thing happens.

  • avatar
    Omnifan

    Kind of the same treatment with “dealer fees” that have been legalized by many state governments. Used to be called “dealer prep,” and when competition drove that to 0, then the dealers used their lobbyists to pass the dealer fee laws. The state ended up imposing this “dealer fee” tax on the consumers. When I bought my last Chrysler vehicle, the dealer told me that since I was using an employee discount I would not have to pay dealer fees. But if I had no discount, I would pay it.

  • avatar
    FromaBuick6

    There’s a lot of unanswered questions here. Steve didn’t mention that the new “title fee” does away with Georgia’s dreaded annual Valorem Tax, which taxes you a percentage of your vehicle’s value every year. On a new car, it can be pretty steep; on my Mustang it was about $450 the first year.

    However, Georgia’s phasing out the tax over the next 10 years; If you currently own a vehicle, you will have to continue to pay the tax until 2023, or until your purchase another vehicle (and pay the title fee). Great.

    The title fee is about the same as the current sales tax, but I’ve yet to find a couple of critical details. Obviously, private sales will now be “taxed.” But what about the trade in credit on new cars? I had a $15k trade in when I bought my Mustang, which cut the amount of sales tax I owed by nearly half…will that continue under the new law?

    What about new Georgia residents? Will they have to pay at the title fee when they transfer their out-of-state title to Georgia, or will that be exempt?

    And what about the counties? They’re obviously going to take a hit once the valorem is phased out. Is there anything stopping them from charging you additional fees of their own?

    The local press and politicians are hyping this up as the end of the sizable “birthday tax” motorists face each year. Something’s missing here. There’s no such thing as a free lunch and Georgia never saw a tax it didn’t like. I sincerely doubt they’re losing revenue in this deal.

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