Do personal property taxes harm new car sales?

[Mike Poore]

The replies to MM2004's thread ( http://www.mercurymarauder.net/forums/showthread.php?t=24088) about the letter he got from his home state, had several references to personal property taxes on automobiles.

This got me to thinking about those states who employ these repressive tax schemes, and if that, by itself, hinders new car sales.

PA has a one time 6% sales tax on the difference paid in the transaction. (new car price minus your trade in), while Maryland charges 5% on the sale price, meaning you pay tax twice on your trade. While this has nothing to do with personal property tax you pay, in some states, upon the valuation of your car annually, it shows how rates differ from state to state.

Here's my problem with personal property taxes on depreciating commodities. Why would anyone ever buy a new car in any of those states? The more valuable the vehicle, the more tax you pay. Isn't it economically feasible to drive older cars, with little or no value, and keep them running, to lower your tax burden? What effect does this have upon new car sales in those states, and most importantly, since older cars are exempt from emissions standards, what environmental impact do these high numbers of older cars have, if any?

Do any of you folks know the answer(s) to these questions? I did a google search and couldn't come up with anything.

[O's Fan Rich]

Mike,
It's my understanding that the States that have this PP tax arrangement, do not have things like a personal income tax, real estate taxes, inheritance taxes and the like.
I could be wrong. But if it's true, what you pay every year on your car could be offset by these savings.

Michelle and I are looking at Arizona as our next home, so I'll be looking into their setup in awhile.

[Mike Poore]

Mike,
It's my understanding that the States that have this PP tax arrangement, do not have things like a personal income tax, real estate taxes, inheritance taxes and the like.
I could be wrong. But if it's true, what you pay every year on your car could be offset by these savings.

Michelle and I are looking at Arizona as our next home, so I'll be looking into their setup in awhile.

But, Rich, that's exactly my point. Drive a heap, and cut your taxes. What a concept!

I mean it's not like seeking a low paying job so you pay less income tax.

I hear Arizona is a great choice, and very advantageous for retired folks. I recall the wonderful Magazine, Arizona Highways, and the extreme beauty of the place.

We'll come visit.;)

[Bluerauder]

This got me to thinking about those states who employ these repressive tax schemes, and if that, by itself, hinders new car sales.
The answer is absolutely, yes !! It is a regressive tax that encourages people to keep their old cars as long as possible because they know that it will jump sky high with the purchase of a new vehicle.

This was one of the prime reasons for the Governor of VA trying to eliminate the "dreaded car tax" several years ago. The tax was to be phased out over a period of 5 years or so. Unfortunately, the effort has been stalled at a level of about 70% phase-out (i.e. I am still paying 30% of the bill). There are alot of reasons why the car tax here in Virginia has not been eliminated ... but I won't get into it here. :rolleyes:

As you know, I just replaced a 10-year old van. My county car tax on the old vehicle was about $54. My estimate on the new car is $648. As the new car depreciates, my car tax will get lower each year. But it amounts to a pretty good chunk of change over the years. I am quite sure that this factors into new car purchase decisions.

My "objection" to the car tax is slightly more philosophical. I figure that the county and the state are gonna get their pound of flesh one way or the other. I primarily object to the way it is done and the timing of the tax bill. Each year, just after school starts the bill arrives in the mail and just before the holidays, it becomes due. These are probably the worst times of the year for anyone to end up with a huge bill for a lump sum that can easily exceed $1000. I would just prefer that it be rolled into the income tax so that it get deducted a little at a time -- less painful that way. :mad:

BTW --- this PP tax also affects other items (e.g. boats, OB motors, RVs, lawn tractors, etc.) and also discourages replacement of older items. :rolleyes:

[Bluerauder]

Mike,
It's my understanding that the States that have this PP tax arrangement, do not have things like a personal income tax, real estate taxes, inheritance taxes and the like.
I could be wrong. But if it's true, what you pay every year on your car could be offset by these savings.
Not true .... Virginia has an income tax and each county assesses a tax on real estate. The personal property tax is a local county tax over and above the two mentioned and further increases the revenue stream at the county level. :depress:

[FordNut]

Mike,
It's my understanding that the States that have this PP tax arrangement, do not have things like a personal income tax, real estate taxes, inheritance taxes and the like.
.
Not true.
Georgia and North Carolina have pp taxes along with real estate tax and state income tax. And they have sales tax.

Tennessee only has real estate and sales tax and I like it that way.

But I still see a lot of new and expensive cars in NC and GA even though they have the enormous tax burden.

[MERCMAN]

In Indiana, we pay PP on the car when we buy our plates, it takes 10 years for it to depreciate down to the minimum tax, so my license plates for the MM cost me almost 400 last year. The county also imposes a 25.00 wheel tax on autos. This has not seemed to put the skids on new vehicle purchases that I can see. Indiana also has no state safety inspection for autos and the only emission testing is done in counties bordering the Chicago area

[Agent M79]

Shortly after I moved to NC, I bought a used Lincoln Mark VII and was so pleased that the taxes at purchase were so low. "Cool", I thought.

Then a year later I got a property tax bill. "Not Cool", I thought.

Yes, when I consider car purchases now, part of the 'operating expenses' I project on it include the taxes.

This is another shade of the question I asked in another thread. How do car customizers disassemble a car to the frame, heavily modify said frame and then proceed to not reuse any of the orginal car in the rebuild and still call it and identify it as the original car?

In this case, if the taxes were beyond the comfort level of buyers, it would make sense to find some old POS, drop a new drive train in it, update the other worn systems, and drive it low-tax or no-tax.

[Mike Poore]

This is another shade of the question I asked in another thread. How do car customizers disassemble a car to the frame, heavily modify said frame and then proceed to not reuse any of the orginal car in the rebuild and still call it and identify it as the original car?
.

Here's an issue our insurers are struggling with now. Especially with rice boys and their hopped up ***** boxes that avoid the high performance premiums we end up paying on our MM's, Mustangs, Corvettes & such. And, of course, like taxes, when someone else games the system, others pay the difference.

[martyo]

I think that to a large extent people's purchasing habits are highly inelastic when it comes to taxation and its effect on buying autombiles.

I am sure Zack will be along in a minute to explain this. :D

[Mike Poore]

I think that to a large extent people's purchasing habits are highly inelastic when it comes to taxation and its effect on buying autombiles. :D

It would be interesting to see where the break point is. Also, interesting would be to look at states that have PP taxes vs the ones that do not, and compare the age of the fleets in those states. That's what I couldn't find on my Google search.:dunno:

You think Zac knows?

[Joe Walsh]

Not true .... Virginia has an income tax and each county assesses a tax on real estate. The personal property tax is a local county tax over and above the two mentioned and further increases the revenue stream at the county level. :depress:

Yep...That is why a good friend of mine (who most definitely will remain nameless) moved from Maryland to Virginia and still has
Maryland tags and registration on their car and boat. They are in NO hurry to buy a new car.
They are not going to contribute to that B.S. personal property tax.
It's good to have close relatives in Maryland...:D

[Bluerauder]

Yep...That is why a good friend of mine (who most definitely will remain nameless) moved from Maryland to Virginia and still has
Maryland tags and registration on their car and boat....:D
Maryland ain't no bargain either, Joe .... they are just a little better at disguising the taxes. I maintained Maryland as my Home of Record for most of the time that I was in the service. Taxes in MD and VA are roughly equivalent .... I ran the numbers when I retired. :D MD gets you with the local county "piggyback" income tax that is based on a percentage of the state income tax. It's really easy to compute .... calculate your state income tax and then add 50% for counties like Anne Arundel or Baltimore County. Percents vary by MD county and some may be as high as 60% now. At least in VA, the personal property tax decreases each year as the vehicle depreciates .... I have never seen the piggyback decrease .... ever.

My last straw with MD happened in 1983. I had bought a car in NJ had it registered there and paid all NJ taxes. When I came back to the MD area and tried to register for MD plates, the state wanted to charge sales taxes all over again. I believe my comment to the DMV supervisor went something like this ..... "I will put the car on blocks and set it on fire before I give MD another cent". :D I have been in VA ever since....... :rolleyes:

[Joe Walsh]

Maryland ain't no bargain either, Joe .... they are just a little better at disguising the taxes. I maintained Maryland as my Home of Record for most of the time that I was in the service. Taxes in MD and VA are roughly equivalent .... I ran the numbers when I retired. :D MD gets you with the local county "piggyback" income tax that is based on a percentage of the state income tax. It's really easy to compute .... calculate your state income tax and then add 50% for counties like Anne Arundel or Baltimore County. Percents vary by MD county and some may be as high as 60% now. At least in VA, the personal property tax decreases each year as the vehicle depreciates .... I have never seen the piggyback decrease .... ever.

My last straw with MD happened in 1983. I had bought a car in NJ had it registered there and paid all NJ taxes. When I came back to the MD area and tried to register for MD plates, the state wanted to charge sales taxes all over again. I believe my comment to the DMV supervisor went something like this ..... "I will put the car on blocks and set it on fire before I give MD another cent". :D I have been in VA ever since....... :rolleyes:

You are right Charlie...Maryland is not a cheap state by any stretch of the imagination! The county piggyback taxes are up to @ 60% in Montgomery county if I'm not mistaken.
I guess that the personal property tax really 'chaps my a$$' because of the # of cars that I own.

[Leadfoot281]

Ouch! I guess I got spoiled living in Wisconsin. $38/yr for plates. Any year, any car. Old/new, didn't matter. And no PP taxes.

Here in Minnesota it goes by the year. Tags for my MM is about $300/year but will drop over time. I thought that was bad! My MM is the first car I've owned that was less than 12 years old and over $2000. No PP taxes here either.

I know a couple years ago Mn started cracking down on people that "had a cabin" in Wisconsin to beat the licence fees on new cars.

[MENINBLK]

In Connecticut, there is a PP tax on vehicles.
It adds about $30 to your monthly payment if it is financed.
$30/month can sometimes break a deal.

[MM2004]

When purchasing a new car in Kentucky, you pay 5.4% sales tax :eek: .

Not on what you paid for it, but what it stickers for. Think about that for a moment :mad2: .

Plates are ~$38.00 p/yr. + propert tax. Last year when plates were due, I had to pay ~$380.00 in order to get my plates.

It's all a scam!

[marauder307]

Missouri's even worse. I bought my car in Florida right before I moved to St. Louis in 2003; MO wanted to collect PP tax for the car during the registration process. I didn't buy it there, I didn't see how MO could claim a right to tax it, and thanks to my coworkers I was able to get through a loophole for the first year....and then had to pay the second year....and then had to pay for the entire year of 2005, even though the car left the state in late August, bound for HI. They didn't even pro-rate it out...

I swear, if the DoD enacts legislation for its civilian workers that parallels the Soldiers & Sailors Relief Act...I'm instantly a Florida citizen again.

Oh, to be back in Florida...I miss my life there sometimes.:depress:

As for buying new cars, don't ANYBODY feel too bad. Dealers in HI not only mark their vehicles up anywhere from 3-10k, but they're even obvious about it. AND they don't give a s--t either. This far out, away from corporate oversight, they get away with outright murder here; nobody's watching, and they know this.

[ctrcbob]

Maruader307,

Be very carefull what you wish for. You may get it!

Florida. Too many people. I will admit that I am part of the problem,
I moved here 10 years ago. When I moved here, Lake county was still very quiet. Population would double in the winter with the "snowbirds" but when they returned home up North, it was a pleasure to drive around in the summer. No Traffic. Not anymore! The traffic here in "quiet Lake County" in the Summer is now worse than it was ten years ago in the Winter. The traffic in the Winter is impossable. I drive to Leesburg twice a week. What used to take me 25 minutes, now takes me 40 minutes in the Summer and sometimes 50 minutes in the Winter.

I have been looking for a house in SE New Mexico. Not a PP State, but they do have an Income Tax. Once I find the house, I'm gone.