OPINION: New car tax will hurt the rural poor

If you get $10,000 today, that’s much more valuable than getting $1,000 over the course of 10 years. With the money in hand, you can make it work for you. You have freedom. You have “elasticity.” With more cash in your wallet, you can make a bigger purchase or you can invest the money and draw greater returns on interest.

The new state car tax system incorporates this logic. The state has long taxed motorists for their vehicles. Now, the state government wants all that tax money up front on cars purchased after Friday, March 1. Anything purchased prior to that can remain on the old, annual payment system.

All those stories you’ve heard about the state revenue problems over the past few years, well, this is one fix, one way to crank up state revenues. The car tax change is part of last year’s HB386, a major state revenue overhaul, which passed 54-0 in the state Senate and 155-8 in the House. All three Madison County legislators — Sen. Frank Ginn, Rep. Alan Powell and Rep. Tom McCall — voted in favor of the comprehensive tax reform.

Motorists have yet to feel the effects of that legislation, but that changes Friday when the car tax kicks in. There’s bound to be some sticker shock in the days ahead. And the poor employees at the tax commissioner’s office are going to be charged with explaining why the new purchases require such a big tax check.

The lump sum payment certainly strengthens the state’s revenue position. And state leaders have actually publicized this as a type of favor to the public. The elimination of the “birthday tax,” does, in fact, wipe out your yearly tax. But that’s because you no longer pay your tax in installments. You’re hit up front. Likewise, you will still have to pay an annual $20 registration fee at the tax commissioner’s office.

The “doing us a favor” seems a bit disingenuous because if given a choice, many of us would gladly stay with the old system and keep more of our money in our pockets whenever we buy our next car. But we’re not given such a choice.

Perhaps this won’t seem like that big of a deal to most folks, especially if you buy a new car. You can basically expect a seven percent tax on the value of your new vehicle. And a new car carries at least some expectation of durability. You know that you can drive it for several years and not pay taxes on it after that one-time check.

But consider the people who really struggle to get by, those who have a hard time maintaining reliable transportation.

If you live in a rural county like Madison County, and you make decent money, then you likely work for school system, the county government or some of the good businesses in this county. But there still aren’t enough jobs locally to support the roughly 28,000 residents here. So, many people look elsewhere, particularly Athens.

This requires a reliable ride. If you work at the university or a quality Clarke County business, then this may not be too difficult for you. But if you’re working a $10-or-$11-an-hour job in Athens, then there’s no way you can afford to be in the new-car market. You either need a mechanics background or you need to make good selections on purchasing used vehicles. Every purchase of a high-mileage, used vehicle is a gamble to some degree. And the new car tax makes that gamble even more perilous.

For instance, if I buy a $3,000 vehicle, then I now have to fork over an additional $200 in taxes up front. If the transmission goes out in six months, which is way more likely in a used car, then I have to fork over the up-front tax again on the next purchase. I have to do that immediately because I have to get to my job. Any person with any job is in that same boat. But if you’re getting by paycheck-to-paycheck, then the additional tax burden adds grief to an already crippling situation.

Meanwhile, a poor person in an urban area can often find some means of transportation that doesn’t involve high gas costs and vehicle purchases and taxation. For instance, they may find a city bus to work. But a poor person in a rural area, such as Madison County, is totally reliant on their vehicle.

There’s a lot made about poor folks getting government benefits. The discussion of “entitlements” carries a lot of emotion.

But there’s generally not much attention paid when government takes action that adds burden to the working poor, particularly in rural areas.

The state altered the car tax system to strengthen its revenue position. Unfortunately, it has simultaneously weakened the prospects of those struggling to get by.

Zach Mitcham is editor of The Madison County Journal.