Push to Repeal State ‘Car Tax’ Starts Debate

First came illegal immigration, then affirmative action. Now Republicans are hoping to rev up a new hot-button issue: a repeal of California’s vehicle registration fee.

Gov. Pete Wilson has indicated he will probably support such a rollback as part of his revised 1998-99 spending plan--a prosperity-fattened budget ripe with a surplus that could approach $3 billion. A formal announcement from the governor is expected within days.

Atty. Gen. Dan Lungren, the presumptive GOP gubernatorial nominee, isn’t waiting for Wilson. He called for a repeal of the vehicle fee in a speech Tuesday, seizing an issue used to advantage by Republican candidates elsewhere in the country.

Noting that the fee was raised during the recent recession to close a massive budget gap, Lungren suggested that doing away with the tax during these good times would be a matter of keeping faith with Californians. Advocates of its elimination say the fee costs the average state car owner $185 a year.

“The crisis is over,” Lungren told an audience of local law enforcement officials. “If we cannot have a tax cut now, on this issue . . . then the people will never be able to trust government when [its representatives] say there is an emergency.”

Echoing Lungren, Assembly GOP Leader Bill Leonard of San Bernardino said Thursday that Republicans’ priority will be to use the state’s anticipated surplus to phase out the vehicle license fee over the next six years.

Democrats were quick to express staunch opposition. Indeed, the proposed cut in the vehicle fee could emerge as the defining issue in this summer’s fight over the 1998-99 budget.

Democrats want any surplus dedicated to education, public works projects, children’s programs, help for the disabled and pay raises for state employees, who have gone without a salary hike for more than three years.

Noting that the vehicle fees now benefit city and county governments, Senate President Pro Tem John Burton of San Francisco said the Republican plan would “absolutely cripple local government.” Assembly Speaker Antonio Villaraigosa of Los Angeles vowed “to stand in front of this train” to block it.

Battle Lines Are Drawn

Assemblyman Tom McClintock (R-Northridge), a longtime anti-tax crusader who led the fight against Wilson’s 1991 tax hike, is sponsoring the legislation to eliminate the fee--or “car tax,” as he calls it. Repealing the levy would cost the state, and by extension local governments, roughly $4 billion annually. Republicans promise that the state would repay local governments “dollar for dollar”--as Lungren put it--from state sales tax revenues generated by a booming economy.

But skeptical local officials are gearing up to fight. Cities get 10% of their revenue from the fee. Counties get 25% of their money from it.

The League of California Cities issued a statement saying, “The state’s track record tells us we should not bank on its promises.”

The raise in the vehicle license fee was one of the few steps taken in recent years to help local government during the state’s tough times. Wilson and lawmakers decreed that money from the fee increase was to pay for health programs run by local government, with the bulk of the money going for the counties’ costs of caring for severely mentally ill people.

Wilson and the Legislature used a complex formula to raise the vehicle license fee as part of a massive 1991 tax hike designed to bring in $8 billion.

Unlike controversies over illegal immigration and affirmative action--which sprang from the grass roots--the license fee issue is of political import to California.

Last year, Republican Jim Gilmore won a landslide victory in Virginia’s race for governor, thanks largely to his pledge to eliminate the commonwealth’s hated “car tax.”

Based on Gilmore’s success, the issue has become the political rage in other places. Democrat Garry Mauro and Republican Guy Millner have raised the issue in their gubernatorial campaigns in Texas and Georgia, respectively. South Carolina Gov. David Beasley called for a repeal as part of his reelection drive. But nowhere has it worked as well as in Virginia.

For gubernatorial hopeful Lungren, striving to consolidate support among fellow Republicans ahead of California’s June 2 primary, the issue presents an opportunity to get in harmony with the party’s tax-cutting wing. Moreover, the issue has none of the jagged edges of the immigration and affirmative action debates.

For Wilson, lowering the fee could further offset the record tax hike he signed--burnishing his credentials for a second try for president in 2000.

Democrats Are Torn

For the Democratic candidates hoping to succeed Wilson, the proposal could present a difficult choice--between a populist-sounding tax cut promise and the policies and priorities favored by Democratic legislative leaders in Sacramento.

As Dan Schnur, a leading Republican strategist, said: “If they come out for the tax cut, they create a problem with the Legislature and the union lobby. If they come out against it, they give Lungren the same issue Gilmore used to win in Virginia last year.”

For now, the Democratic gubernatorial hopefuls are noncommittal. Spokesmen for businessman Al Checchi and Lt. Gov. Gray Davis used identical words Thursday, calling the proposal “something that needs to be carefully looked at.” Rep. Jane Harman also took no position.

Despite Republican enthusiasm, it is not clear that the issue will catch fire politically in California the way it did in Virginia--or for that matter in Arkansas, where then-Gov. Bill Clinton was booted out in 1982 in no small part for raising the state’s annual car registration fee from $17 to $25.

The levy in Virginia was a property tax on personal vehicles that could easily run $1,000 a year or more.

In fact, the independent legislative analyst’s office noted earlier this week that vehicle license fees can be deducted on tax returns, meaning its elimination would save most taxpayers only about three-fifths of what they now pay. In other words, the average savings for California’s 16 million motorists would be about $111 a year, or $2.13 a week.

Tim Hodson, director of the Center for California Studies at Sacramento State, said a case could be made for using the money “to take care of deferred maintenance” on state infrastructure and other needs ignored during the recession. Making the rhetorical argument, Hodson asked: “Is the few dollars it means for individual taxpayers worth it, especially if it means a year or two from now the state will have to raise other taxes or fees” when the current windfall subsides?

On the other hand, Hodson won’t dismiss the visceral political appeal. After all, he said, “we are Californians. This the state that invented the automotive lifestyle.”

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About California ‘Car Tax’

Here is information regarding the state’s vehicle license fee--or “car tax,” as opponents call it--averages $185 per vehicle per year.

* Established in 1935 in lieu of a state tax on personal property, the fee produces $4 billion a year in state revenues.

* Gov. Pete Wilson and the Legislature raised the fee to help close a massive budget deficit in 1991. The increase was primarily earmarked to help counties pay for care of severely mentally ill patients.

* The current fee is 2% of what the Department of Motor Vehicles determines is the fair market value of a car or truck. If it is eliminated, the state will continue to charge a $27 annual registration fee per vehicle.

* Elimination of the fee would apply to individuals and businesses, such as trucking firms and rental car agencies, that have large fleets.

* Republican gubernatorial candidate Dan Lungren has called for a repeal of the fee. Democratic hopefuls Al Checchi, Lt. Gov. Gray Davis and U.S. Rep. Jane Harman have taken no position.