Cities, Counties Would Benefit, Not Lose, With Assembly Plan

During a parliamentary debate, Winston Churchill said of the opposition, “I do not believe it would be possible to state the opposite of the truth with greater precision.”

His words bear repeating as the Sacramento spending lobby erupts into a veritable Mt. Vesuvius of misinformation concerning the proposal to abolish California’s annual vehicle license fee, or “car tax.”

To place things in perspective, the proposal to phase out the car tax over a five-year period is only half the size of the tax increase imposed in one blow by the state in 1991. Even combined with all of the tax cuts since then, abolishing the car tax would merely restore the overall rate of taxation to about what it was before adoption of the 1991 budget, and would still provide more than $13 billion of new funds from normal economic growth.

The spending lobby has constructed a gigantic straw man in its attacks against this proposal, which I introduced, by enlisting liberal city and county officials to argue that abolishing the car tax would decimate local services.

The truth is precisely the opposite. The proposal actually provides cities and counties greater constitutional protection and more money than they have right now.

Under current law, the car tax goes entirely to city and county governments--not a dime goes near our highways. The tax is assessed by the Department of Motor Vehicles, paid by the motorist through the annual registration renewal fee (averaging about $185 per vehicle) and then transferred to local governments.

Under my proposal, the DMV would still calculate the amount due to cities and counties for the automobiles registered in their jurisdictions, but instead of billing the taxpayers though exorbitant renewal fees, it would draw from a constitutionally protected replacement fund fed from existing state sales tax revenue.

Local governments would get much stronger constitutional protection over their funds. Currently the legislature is prohibited from raiding the vehicle license fund, but it could reduce the fund at any time by a simple majority vote. My proposal not only constitutionally prohibits the state from raiding the replacement fund, it also prohibits the state from reducing this revenue.

Local governments also would get more money. Right now, the DMV skims 7% off the top as a collection fee for administering the car tax. Although the replacement fund would still be administered by the DMV, there would no longer be a collection cost because the replacement revenues would come directly out of the state’s sales tax revenues.

The Proposition 98 school funding guarantee would be completely protected, as would the rapid growth rate in the constitution’s school funding formula.

The money for this much-needed tax relief would come out of just a small portion--about one-seventh--of the $4.4 billion state budget surplus. Even if the state’s current economic boom went bust next year, the phase-out of the tax could be completed without affecting any current state programs. It simply means that the non-education side of the state budget would grow more slowly than it otherwise would over the next five years.

Abolishing the car tax would mean another $370 for an average two-car family every year. That’s enough to buy 40 books for their children to read. Or it could mean the phonics tutoring that their daughter desperately needs. Or it could mean a used computer for a family that has never had one and the next year, Internet access and 10 new education programs for their kids. Give this money back to parents and they will spend it far more wisely and far more effectively than the bureaucracy ever could.

California’s treasury is overflowing with billions of dollars of unexpected revenue. California drivers already bear the third-heaviest per-vehicle taxes in the country. They are about to see hefty increases in smog inspection fees because of the SMOG II program. States across the country--including Virginia, Arizona, South Carolina and Washington--are giving their taxpayers a break this year by abolishing their car taxes.

If we can’t rid ourselves of the car tax this year, we had better be prepared to live with it for the rest of our lives.