The Convoluted Politics of Tax and ‘Appreciate’

When politicians felt underappreciated in days gone by, they would do something simple like name a bridge or a building after themselves. The cost was merely the price of a sign, which the public was then free to ignore.

Not anymore. The price of official vanity is going up faster than your utility bill.

A case in point can be found in California Department of Motor Vehicles renewal notices now being mailed to car owners throughout the state. At the bottom of each notice is a confusing question-and-answer discussion titled “Vehicle License Fee Tax Rebate.” The 150-word bureaucratic explanation can be translated into 25 words of plain English: “You must pay twice the amount you legally owe, and then wait until we get around to sending you a rebate check for the difference.”

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The reason for this infuriating drill is equally simple. To give the illusion of frugality while he was increasing the state budget more than 20% last year, Gov. Gray Davis accepted a reduction in the vehicle license tax. But instead of a direct tax cut that motorists would enjoy immediately, he insisted that the state mail out rebate checks only after every Californian had paid the unnecessary tax.

As he explained in a rare moment of candor, “People don’t appreciate the fact that they’re getting a rebate unless they see it in their hands.”

Hence, for the next two years (until after the gubernatorial election) Californians will be forced to go through this silly exercise just to be sure they adequately appreciate the governor’s largess.

It isn’t cheap. Last month, the DMV handed the state Legislature a $9-million bill to cover the first six months of processing 21.5 million rebate claims. This is on top of the state controller’s cost of $22 million to write and mail the checks. The total administrative cost over two years will be at least $41 million.

It doesn’t stop there. Until the bureaucracy gets around to sending back the rebates, the rightful owners are denied the interest their money would otherwise earn. If it takes just eight weeks to turn the checks around, taxpayers will lose $34 million in interest over the next two years, assuming a rate of 6%.

After the budget was adopted in June 2000, a bipartisan coalition introduced legislation to replace the rebate with a direct reduction in the tax. Even the author of the rebate scheme renounced her work, and the corrective measure sailed unanimously out of the normally contentious Assembly.

The very next day it was quietly buried in the Senate by Democratic leaders who freely admitted that they were acting on the instructions of Davis, even while the governor was publicly expressing ambivalence.

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The DMV is now mailing renewal notices that credit the governor for signing the reduction, and then launch into an explanation as convoluted as the process itself. Perhaps, however, the governor has underestimated the common sense of the people of California, who are starting to ask the obvious: “Why not just lower the tax?”

The state Senate recently approved another bipartisan effort by Sen. Joe Dunn (D-Santa Ana) and myself to replace the rebate with a simple and unadulterated tax cut. Senate Bill 22 is in the hands of the state Assembly as millions of Californians are being forced to go through this pointless ritual of gubernatorial homage.

As motorists begin to realize the high cost of having proper appreciation for the governor, we may find that what they would really appreciate is an honest and straightforward government.