Posted on 04/07/2006 12:53:52 PM PDT by Responsibility2nd
Under Texas' new tax proposal, savvy consumers who get a deal from a private seller on a used car or truck won't get the same deal from the tax assessor.
To get $70 million in extra money for the state's budget, the Texas Tax Reform Commission has proposed a "liar's affidavit" that would crack down on used-car sales in Texas to thwart sales-tax fraud.
That means someone who buys a discounted vehicle would have to pay sales tax on its full value.
The provision is a relatively small part of the overall tax reform proposal, which seeks to raise $6 billion in extra money to replace funds from property tax cuts. But it would hit thousands of Texas consumers, since a third of all used car transactions involve private sellers.
A similar "clunker act" passed by the Kansas Legislature in 2004 was repealed a year later because consumers complained they paid excessive sales taxes. The state now is offering refunds.
The legislation What is it? Would require county tax assessor-collectors to charge sales tax on used vehicles based on average retail value of a motor vehicle. Or consumers could get an appraisal done by car dealer or insurance adjuster. When does it take effect? If approved, go into effect Oct. 1.Why proposed? An effort to reduce sales tax fraud.
How much will it raise? Estimated additional $70 million.
Can I still give a car or truck to someone and not pay sales tax? That provision remains intact. Texas has a $10 gift tax for motor vehicles and $5 tax when trading one vehicle for another.
Source: Texas Tax Reform Commission
Under Texas' proposed bill, consumers would pay sales tax to the county tax assessor-collector based on the car or truck's average retail value instead of its sales price. Tax authorities would use a national assessment tool such as the Kelly Blue Book, which provides values of used vehicles by year and model.
If consumers don't want to accept that value because of a vehicle's high mileage or damage, they can get an independent appraisal from a car dealership or an insurance adjuster.
The bill requires car dealers to provide a certified appraisal of the retail value for a fee, which would be set by the Texas comptroller.
If the bill is approved, the new requirement would take effect Oct. 1.
The proposal has appeared in previous bills in several sessions dating back to 2003, but it never has passed both houses, said Dick Levine, senior fiscal analyst with the Center for Public Policy Priorities in Austin. The center hasn't taken a position on it, he said.
"The argument against it was a lot from the tax assessors and collectors that said they didn't want to be a position to police this," he said.
Theoretically, the legislation sounds good. But in reality, it would create more work, would anger taxpayers and wouldn't generate much revenue, Bexar County Tax Assessor Sylvia Romo said.
"I would say that the majority of the people are honest," Romo said. "I think that this problem is more exaggerated than it really is. In the long run, it's going to be unfair to some people and it's going to create more problems."
One problem for Romo: The Bexar County tax office would have to add more staff to deal with the paperwork and to deal with irate taxpayers.
The crackdown on the motor vehicle sales tax is meant to capture some of the revenue lost when a consumer buys a car or truck from another person and they agree to lower the sales price so the buyer pays less sales tax.
"Dealers have to disclose things that private individuals don't," said Bill Wolters, president of the Texas Automobile Dealers Association. "With individuals, there is less of a paper trail, less verification and less regulation."
The association doesn't object to the sales tax crackdown, Wolters said, but it still is evaluating the overall tax proposal. It doesn't like the fact the bill would require businesses to pay a margins tax instead of an income tax.
"We think it will be a difficult tax for marginally profitable businesses," Wolters said.
Nevertheless, at a news conference Thursday at the Governor's Mansion, Gov. Rick Perry said the bill has plenty of supporters.
So far, 23 trade, education and taxpayer associations representing more than 3 million Texans have endorsed the tax overhaul, he said.
The measure would lower local school property taxes by expanding the business tax, raising the cigarette tax and using part of the state's surplus.
"I think there is momentum growing every day toward the passing of the tax reform plan that we laid out," Perry said. The Republican governor was joined by plan supporters and former Comptroller John Sharp, who headed the special tax commission that developed the plan.
Sharp said in an interview that the average car dealer in Texas would see taxes decrease under the proposed bill.
Another potential beneficiary of the "liar's affidavit:" collectors of antique cars, who often pay above a vehicle's Kelly Blue Book value. Under the tax proposal, they would pay less tax.
Nothing is certain, except death and texas, er...
If this were happening in NJ, there'd be posters lining up to make snide remarks about my state.
(Denny Crane: "I Don't Want To Socialize With A Pinko Liberal Democrat Commie. Say What You Like About Republicans. We Stick To Our Convictions. Even When We Know We're Dead Wrong.")
How is this one for you:
I thought Texas was a great Conservative bastion? What gives?
In my opinion 99% of any government in any state is corrupt, and invents ways to steal citizens money and erode personal freedoms.
"New Jersey ... Who Farted?"
New Jersey, Just across the river from a real city.
New Jersey: Toll Booths 'R Us!
Like Nevada but with more taxes!
Now with 10% less toxic waste!
New Jersey: Flushed With Pride
"New Jersey: Our Governor Is Gayer Than Your Governor"
New Jersey: It Glows in the Dark
New Jersey Someone's Gotta Live Here
New Jersey, At least we aren't as corrupt as Louisiana!
"New Jersey: What Happens Here, Stays Buried Here."
New Jersey: Ten thousand murder victims can't be wrong!
might as well go after garage sales too...
find a good deal on a portrait that turns out to be a Picasso ? Don't tell anyone.
I never understood this.
When the car was purchased first-hand, wasn't a tax paid to the gubmint?
So when the gubmint aims to tax an item for which a tax has already been paid, doesn't this constitute a double-taxation?
I propose the gubmint pay the original owner a present-day-value reimbursement of the tax paid originally, at the time the owner transfers the item to another party, who will be forced to pay a tax for it.
You have to keep on eye on these jerks regardless of party affiliation.
this is one of those things i still haven't figured out how its legal.. if i buy a vehicle for $20,000, and pay my sales tax, then if i sell it to a private individual later, they get the tax AGAIN? then again every time its sold? same goes on houses, death taxes, gift taxes, etc. multiple taxing on the same item just seems wrong.
Looks like taxing a car once isn't enough for Texas...
The State of Kansas tried that one until our elected sock-puppets got the message fromt he voters, loud and clear!!!
haha, yes, I'm sure the other poster meant JUST like that!
Thanks for a hearty laugh.
we had this in KS for one year...hell was raised.
For example, if I buy an old restorable VW Bug (I'm a old VW nut) for $500, the county taxes me on their determined value-a restored 1973 VW Bug could sell for around 3-5,000.
Lest you think I am joking, a similar scenario happened to me. I bought a VW sans engine for $1. I just wanted the bodyparts.
Now, if I put one of my old 1600 engines in it, and go down to the tag office, they will tax me for what they think its worth, not what I paid for it.
Or at least they would have, until Kansans raised hell last year....
Well if they can't stop it in Texas then we can't stop it anywhere. These days they are messing with Texas and getting away with it.
Precisely. Which is why instead of "liberal vs. conservative," we need to start seeing things as "the state vs. the people."
Why do you pay taxes (the full value of the car) when you lease a vehicle?
Unbelievable. I mean, on the one hand, it's pretty much a given that most ppl underreport the sale price of a used car, right? I mean, let's be real. But on the other hand, just letting the gubmint say it's worth what they want it to be worth is nuts.
It's been this way in Pennsylvania for as long as I can remember.
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