Days Before Vote, Higher Vehicle Fees

With the recall election less than 10 days away, car-obsessed Californians will be required to pay as much as three times more to license their vehicles, starting this week. The increase will ensure that Californians pay among the highest car taxes in the country.

And that has Pasadena resident Percy Kosoi fuming.

“It’s ridiculous,” Kosoi said. “If you’re going to raise it, raise it a little, but don’t triple it.”

The higher car tax, which will require him to pay about $445 next March for his new Toyota Camry, has prompted the 77-year-old retiree to consider voting to recall Gov. Gray Davis.

“In a way, I was leaning toward saving him,” Kosoi said. “But now, with this, I haven’t made up my mind. It doesn’t help him.”

In a state that is often referred to as the car capital of the world, the tax hike is seen by many as an assault on their way of life. Major recall candidates have sought to capitalize on Californians’ emotional attachment to their vehicles, plastering “Stop the Car Tax” posters on telephone poles and flooding talk radio with angry curses against the governor.

The average annual vehicle license fee for a passenger car will increase from about $70 to about $210, with the hike taking effect just days before the Oct. 7 recall election. Other fees in the car registration bill are not affected.

Anger over the car tax could encourage voters like Kosoi to flock to the polls.

“This could be the one unforeseen risk for the governor,” said Sherry Bebitch Jeffe, a USC political analyst. “This could stall the momentum that appears to be turning” in Davis’ favor.

The increase touches most Californians. Unlike gasoline and sales taxes, which residents pay out during the course of a year in smaller amounts, the car tax requires them to write checks, often hefty ones, to the state.

Dealerships throughout the state have been cashing in on anger against the tax by urging consumers to buy cars before the new tax kicks in on Oct. 1. Sales jumped 20% at Galpin Ford, which operates eight dealerships, after the North Hills-based company started running anti-tax ads a few weeks ago.

Republicans say the Davis administration illegally hiked the fee to raise $4.2 billion to help plug a gaping hole in the state budget. Davis countered that state law passed by the Legislature and signed by his predecessor, Gov. Pete Wilson, in 1998 required the fee to return to 2% of a vehicle’s value when the budget was in the red.

Four dozen GOP legislators have challenged the hike in court, along with the Howard Jarvis Taxpayer’s Assn. They contend the tax increase is illegal because only a two-thirds vote of the Legislature can raise taxes.

Starting Wednesday, Californians will be required to pay 2% of each vehicle’s value to the Department of Motor Vehicles when they renew its registration. Over the last five years, motorists have seen their fees decline by two-thirds.

When Wilson approved a bill lowering the car tax five years ago, the state treasury was flush with cash, thanks to the dot-com boom. Most vehicle owners received rebate checks in the mail and quickly became accustomed to paying lower fees to register about 30.8 million cars, trucks, trailers and motorcycles each year.

But lawmakers and Wilson envisioned a time when the treasury would run dry and the “temporary rebate” would end.

That end came earlier this year, when a $38-billion shortfall threatened cuts in basic government services unless lawmakers found other funds. Davis’ finance chief, Steve Peace, announced in June that the state would restore the car tax to 1998 levels, citing the so-called trigger in the Wilson administration law.

Since then, the DMV has sent 600,000 notices weekly to car owners, alerting them to the higher fees.

Officials with the Automobile Club of Southern California say they have received dozens of protests from members in the last month.

“Of course I’m upset -- very upset!” said Rick Morris, 47, an airline mechanic from Van Nuys, as he waited in line at the Auto Club’s Manhattan Beach office.

He said the license fees for his 2000 pickup will rise to $1,011 when his registration fees come due next year.

Morris said he had already made up his mind to vote yes on the recall, but the leap in motor vehicle license fees had served to strengthen his resolve to get to the polls Oct. 7.

“I blame the governor. He should have fought this,” Morris said, waving his registration slip as he spoke. “I’ve got three cars, and I’m going to be looking at $3,000. Triple the amount? I only wish I got pay raises like that.”

The car tax is hardly a new issue in California.

Since 1935, the state has been collecting the tax on behalf of cities and counties, which rely on it for between 10% and 25% of their revenue. Many cities and counties use the money to pay for such things as police and fire services and providing homes for abused and orphaned children.

Although Californians have grumbled about the car tax for years, they didn’t challenge it until 1997, when Republican James Gilmore won Virginia’s governor race largely by pledging to eliminate the commonwealth’s hated vehicle license fee.

Davis said he supports reducing the fee as long as it does not mean cuts to local police and fire departments, which are primary beneficiaries of the tax.

Davis included the car tax increase in his revised budget last May after the Legislature rebuffed his January proposal to raise more than $4 billion by increasing taxes on cigarettes and the income of the richest Californians. He said he still favors his original proposal.

Republican recall candidates Arnold Schwarzenegger and Tom McClintock have said they would roll back the tax hike on their first day in office. Lt. Gov. Cruz Bustamante, however, doesn’t want to completely scrap the vehicle license fee, proposing that it be eliminated for cars selling for less than $20,000.

With the increase approved under Davis, a Californian purchasing a 2003 four-door Honda Accord would pay more in vehicle license fees than a resident in any other state except Delaware, according to an analysis by Edmunds.com, a Santa Monica-based automotive information service.

Even so, researchers point out that higher-income Californians, who purchase more expensive vehicles and are more likely to own multiple autos, pay a sizable chunk of the car tax. All Californians who itemize their taxes can deduct the fee from their taxes, said Mark Ibele, a researcher in the state legislative analyst’s office.

Each year, many Californians pay more in gasoline taxes than in vehicle license fees, said Elias Lopez, a senior economist at the California Research Bureau who has studied various vehicle-related taxes. The car tax fee might be lower, but it’s “such a political hot potato,” he said.

As they fight Davis’ recall, Democrats are nervously watching a ballot initiative launched by McClintock that would abolish the tax altogether and pull funds for cities and counties out of the state’s general fund. McClintock, who has built his campaign to replace Davis around the car tax, sponsoring “Stop the Car Tax” posters on telephone poles throughout the state, has started collecting signatures to place the initiative on the November 2004 ballot.

Ted Costa, who conceived the recall drive against Davis, is spearheading McClintock’s initiative. Costa said the car tax has already buoyed the recall effort -- signatures on recall petitions doubled after the Davis administration announced the tax hike in June.

Democrats fear that vehicle license fee hikes also could cause voters to rush to the polls, as they did in 1978, when 60% of the electorate turned out after the Los Angeles County assessor sent out hefty property tax bills two weeks before the vote on Proposition 13, which limits property tax increases.

Supporters of the car tax say major recall candidates have failed to specify how they would make up for the $4.2-billion shortfall that would result if the car tax increase were repealed.

“The amount of money we’re talking about here is more than the entire state contribution to the University of California,” said Jean Ross, executive director of the California Budget Project, which studies the budget’s effect on low- and middle-income Californians and approves of the tax. “You could eliminate the University of California and still be short by a billion dollars.”

Times staff writers Jean Merl and David Pierson contributed to this report.