Wilson Proposes 75% Cut in Vehicle Fee

Declaring Californians an overtaxed people, Gov. Pete Wilson on Wednesday proposed some relief--a plan to slash the vehicle license fee 75%, saving motorists $3.6 billion annually when the cut is in full force in 2002.

The proposal, part of Wilson’s revised budget for the upcoming fiscal year, is the latest in a flurry of pitches to reduce--or abolish--the so-called car tax that vehicle owners pay to the Department of Motor Vehicles each year.

Wilson characterized his proposal as the largest tax cut in California history. If it survives an arduous journey through the Legislature, it would help the governor cloud memories of the record tax increase he signed during the depths of the recession in 1991.

In a news conference at a Sacramento Ford dealership, Wilson said cars have become “a necessity, not a luxury” for Californians, who own 21 million cars, motorcycles and pickups.

“Unfortunately,” the governor said, “the state is heavily overtaxing that necessity--to make it far less affordable for families to buy a new car or keep more than one set of wheels in the garage.”

Proponents of the fee reduction say that the average vehicle owner pays about $185 annually. But that estimate excludes commercial vehicles and trucks. When they are added, the average per-vehicle fee drops to $157, DMV figures show.

Created in 1935, the fee is an annual levy on all registered vehicles, adjusted according to a depreciation schedule set by state law. Initially fixed at 1.75% of a vehicle’s worth, it was increased to 2% of the value in 1948. Under Wilson’s proposal, the fee would be reduced to 0.5%.

Most of the money raised from the fee goes to cities and counties, which spend it on services such as law enforcement, health care, parks and libraries. Los Angeles County is expected to take in $815 million in car fees next year. Orange County collects about $226 million a year and Ventura County counts on about $71 million annually.

Under Wilson’s proposal, the vehicle fee would be cut in half beginning Jan. 1, for an initial overall savings to car owners of $2 billion a year. The fee would be trimmed an additional 50% at the start of 2002, bringing the total annual savings to $3.6 billion.

Republicans are enthusiastically behind the idea of rolling back the fee. Assembly Republican Leader Bill Leonard of San Bernardino called it the Assembly GOP’s main priority in this year’s budget fight, and Atty. Gen. Dan Lungren has embraced the cut as part of his campaign for governor.

Assemblyman Tom McClintock (R-Northridge) has introduced a bill seeking to repeal the fee. He said Wednesday that he will continue that fight, but he applauded Wilson for “getting us three-fourths of the way there.”

Sen. Jim Brulte (R-Rancho Cucamonga) echoed that praise and said the fee cut would help clean the air by boosting new car sales, thus reducing the number of high-polluting older cars on the road.

Democrats, however, warned that such a cut could cripple local governments, some of which receive a significant chunk of their revenues from car fees.

In Lynwood, for example, such fees account for 23% of all revenue. In the San Bernardino County city of Highland, the figure is 28%, although in Beverly Hills--awash in sales and property tax revenue--vehicle fees account for just 2% of total income.

Despite Wilson’s pledge that the fee revenue would be replaced “dollar for dollar” by money from the state’s general fund, city and county officials are suspicious--and anxious about the reliability of such financing if the economy goes south.

“The Legislature does not have a track record that builds any trust,” said Dwight Stenbakken, legislative director for the League of California Cities. “They could make good on the promise and pay us the money this year, and then change the whole deal if they get in [financial] trouble again.”

Assemblyman Wally Knox (D-Los Angeles) believes that local government leaders have reason to be wary, saying legislators “time and time again” reverse spending priorities set in prior years.

Knox added that Wilson’s “whole proposal is premised on the idea that our California miracle is going to continue and continue and continue. . . . I’d be very happy if we have perpetual prosperity, but we all know that ain’t happening.”

As the divided opinion suggests, the vehicle fee is likely to be a major stumbling block in budget negotiations this year.

Senate President Pro Tem John Burton (D-San Francisco) said Wilson’s proposal would not pass the upper house, and Assembly Speaker Antonio Villaraigosa (D-Los Angeles) has been highly critical of McClintock’s legislation.

For his part, Wilson said he would be “very firm” in his demand for the fee cut.

“I don’t negotiate in public,” the governor said, “but it’s very clear I think that this is the first priority.”

The vehicle fee produces $4 billion annually in state revenue. In 1991, Wilson and the Legislature raised the fee by adjusting the depreciation schedule as part of a package of tax increases to close a massive state budget deficit.

The legislative analyst’s office noted in a report this week that vehicle license fees are a tax deduction for many Californians, so most taxpayers would realize only three-fifths of the cut’s full impact.

California is not the first state to debate the car fee. In Virginia last year, Republican Jim Gilmore won a landslide victory in the governor’s race in part because of his pledge to eliminate the commonwealth’s vehicle fee, which was much higher than California’s.

And Bill Clinton was booted from the Arkansas statehouse in 1982 after raising the state’s annual car registration fee from $17 to $25.

Critics say Wilson is championing the car fee cut as part of his preparation for a possible presidential campaign in 2000.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Abolishing the ‘Car Tax’

Gov. Pete Wilson is proposing to cut the vehicle license fee by 75%, which would save motorists $3.6 billion annually when fully implemented in 2002. Examples of savings on new cars:

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Current vehicle After car 1998 models license fee tax cut Savings Escort $290.50 $72.62 $217.88 Explorer $655.30 $163.82 $491.48 Taurus $388.50 $97.12 $485.62 Windstar $483.90 $120.97 $362.93

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Source: Governor’s office

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Times staff writers Carl Ingram and Dan Morain contributed to this story.