State Will Spend $22.2 Million to Make Sure Voters Notice ‘Car Tax’ Cut

The “car tax” cut Californians will get next year is one Rube Goldberg might appreciate.

To get vehicle registration tags next year, people will write checks, as they always have, to the Department of Motor Vehicles. The state will cash them. A month or so later, each vehicle owner will get about half the fee back.

This system will start next January and go on for two years.

Writing and mailing the checks to Californians who have paid the tax on their 27.8 million cars, trucks, motorcycles and trailers will cost the state $22.2 million--40 cents per check. Then in 2003, after the election in 2002 is over, car taxes will simply fall permanently.

Why did state legislators decide to send rebates rather than simply cut the car tax? Because political wisdom is that voters don’t realize they have received a tax cut if politicians merely reduce tax rates. They realize it only if they get a check in the mail.

And because Gov. Gray Davis demanded it.

“I fought aggressively to make sure it was a check,” Davis said Friday, “because people don’t appreciate the fact that they’re getting a rebate unless they see it in their hands.”

The second year of rebate checks will arrive in 2002, while Davis is running for reelection. “I would be the last one to object if voters give the governor some credit for returning some money to them in 2002,” said Garry South, Davis’ top political consultant.

On Friday, Davis renewed his threat to veto the tax legislation, approved Thursday as part of the state’s new $100-billion budget. Although the governor said Friday that he will sign the budget, he is demanding that legislators approve separate legislation granting $100 million in business tax breaks he proposed earlier this year.

But the governor also is embracing the car tax rebate idea. Under that plan, more checks will be sent to more people than would have received them if legislators had approved Davis’ income tax rebate plan or a sales tax rebate plan legislators offered earlier this month, he noted.

“As far as Californians are concerned, they just want money back,” Davis said. “They’re getting it back, and they deserve to get it get it back.”

Davis’ Department of Finance estimates that the average check will be $63, less than half the sum Davis first envisioned when he proposed giving individuals checks for $150, and double that for couples filing joint returns.

While rebates benefit politicians who are associated with giving them, this year’s rebate is especially important, given the record surplus, estimated to be at least $12.8 billion. If the entire surplus were spent to finance government expansion, there might be added pressure for a taxpayer revolt, similar to the property-tax-slashing Proposition 13 of 1978, South noted.

Car taxes have been the subject of debate for more than two years in Sacramento. In 1998, Gov. Pete Wilson pushed to cut the fee, which had been 2% of the vehicle’s market value, by two-thirds in a series of steps ending in 2003.

Because of Wilson’s measure, the car tax already has been cut twice, once in 1999, and again this year. The state has sent registration renewals to Californians with the words, “Car tax cut information,” stamped in red block letters on the outside of envelopes.

Still, most people are unaware of it.

“When you bring up the vehicle license fee to average people, they don’t know what you’re talking about,” said South, who has been asking questions in focus groups about the issue for years.

The legislation approved Thursday would make the full car tax cut envisioned by Wilson effective next year. But about half the final step will be in the form of a rebate.