Use of Tragedy to Justify Illegal Car Tax Is a Scandal

When Samuel Johnson said “patriotism is the last refuge of a scoundrel,” he’d obviously never seen California politics. If he had, he would have known that tragedy is actually the last refuge, as seen in recent attempts to link the state’s devastating fires to repeal of the car tax.

“Heroes Ride on the Car Tax” is how a Los Angeles Times editorial took refuge in the tragedy. If the car tax were reduced to its legal level, warned The Times, the funds that pay for our heroic firefighters would be decimated.

Wrong. Five years ago, a series of legislative enactments reduced the car tax by two-thirds. Local governments, which pay for firefighters, never lost a penny of funding because the law fully reimbursed them from the state’s General Fund. The law even provided that if the state should go bankrupt, funds would still flow to local governments through a temporary, month-to-month car tax increase directed by the state controller.

In June, Gov. Gray Davis tripled the car tax by fiat while cutting off reimbursements to local governments for three months. His action cost cities and counties $1 billion in lost revenue and cost motorists an additional $4 billion in unauthorized taxes. The only time local governments have lost money from the car tax is when Davis raised it.

The official legal office of the Legislature has already opined that not one of the conditions required to raise the tax has been met. If the courts agree, the illegally collected tax -- plus interest -- must ultimately be returned, blowing a new multibillion-dollar hole in a future state budget.

Thus, Gov.-elect Arnold Schwarzenegger’s promise to rescind Davis’ action immediately not only would restore the $1 billion that Davis illegally withheld from local governments but it would protect the state from a crisis in the future.

My proposal to abolish the car tax provides local governments a constitutional guarantee of reimbursement that future governors and legislatures cannot evade. It also stops the Department of Motor Vehicles from taking 7% of car tax revenue as a “collection fee.”

Obviously, economies must be made in the state budget to offset the difference, but that is hardly impossible. The Reason Foundation has recommended bureaucratic streamlining that alone would provide sufficient savings to abolish this tax while providing better funding and stronger fiscal protection to our local governments.