SUMMARY:  LC 18 9068S

NOTE:  THE VERSION SUMMARIZED HERE IS A SUBSTITUTE UNDER CONSIDERATION OF THE SENATE FINANCE COMMITTEE.  CLICK ON THE LINK ABOVE TO READ THE BILL. 

Eliminates the sales tax and ad valorem tax on motor vehicles titled in Georgia after January 2011 and replaces those consumer costs with a one-time title fee of 6.75% of the value of the vehicle. The bill also provides a mechanism for state funding of trauma care. 

REQUIREMENTS:

• Eliminates the sales tax and ad valorem tax on motor vehicles titled in Georgia after January 2011 and replaces those consumer costs with a one-time title fee of 6.75% of the fair market value of the vehicle.  Owners of motor vehicles titled prior to January 1, 2011, would continue to pay ad valorem taxes until the title is transferred.

• Part of the proceeds will go to the state and part to the local governments.  The local share is to be distributed as sales taxes are.  

  • In 2011, the state would get 48% of the title fee revenue, the locals 52.%
  • It shifts by 2% each year so that in 2015, the state would get 40% and the local governments 60%. 
  • Local governments currently receive 65% of the combined state and local ad valorem and sales taxes on motor vehicles.  
• The bill also provides a mechanism for state funding of trauma care.
• A committee would be created in 2015 to review and compare the revenue under the two systems.

POINTS TO CONSIDER:

• The fiscal note makes a number of assumptions that may or may not be accurate due to all the variables involved.  It estimates revenues for 2011 - 2015.  It shows that statewide, local governments would lose revenue beginning in the third year.  The state receives more than it currently does in each of those years.
• Local levels of service should not suffer in order for the state to increase its revenue.  It is estimated that local taxing authorities would have to receive 80% of the title fees to be made whole in this change. 
• We cannot reliably estimate from data available the effect of this change on local school systems.  Currently, on a statewide basis, motor vehicle ad valorem taxes for school systems are $395 million, 7% of the taxes levied for maintenance and operations.  Another $12 million was levied for school bonds.  In 28 systems, it is 10-16% of the M&O revenue.  In 94% of the districts, it is 5% or more. (From the 2007 summary of ad valorem taxes levied, the latest available from the Department of Revenue website).
• Revenue from title fees will not be as predictable as ad valorem taxes.  Just as the sales taxes collected depends on the number of vehicles bought each year and the value of those vehicles, so will the title fees.
• The bill's authors believe revenue collected this way will be much higher since it will capture funds from casual sales -- a neighbor buying a car from a neighbor, for instance, when sales taxes are often not paid.  Others point out that rental car companies are likely to title their vehicles elsewhere to avoid this fee.
• This bill would give school boards a revenue stream separate from the property taxes which are subject to the millage cap.
• The review committee should include school board members as it does city and county officials.
• It would make more sense to determine what data is needed to compare the revenue from the two approaches down to the local level and collect it for five years so we would know the impact than to change the system and check back in five years.
• In the current economic climate, it should be a priority to keep what we can stable rather than destabilizing one more area of revenue.

EFFECTIVE DATE:

January 1, 2011