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A similar "clunker act" passed by the Kansas Legislature in 2004 was repealed a year later because consumers complained they paid excessive sales taxes.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.
might as well go after garage sales too
They already do. $15 "fee" for a garage or lawn sale. If you don't pay, $200 fine. Fortunately, it's rarely enforced in N.E. San Antonio.
Perry really needs to go.
Y'know... you're starting to sound like the Founding Fathers...
No argument with you there, but consider the alternatives.
Strayhorn? Yeeesh!
Kinky? HA!
Hey, more job security for appraisers.
"Hello, I'm from the government, and I'm here for our cut. Now bend over you serf!!"
I'm from-a Dollars. Dollars, Taxes.
The thing that gets me is if you honestly paid $1 for the shell and slapped your own engine in...they still stick ya. I thought we were supposed to reward thrift and recycling...hehe
Our dingbats in Topeka thought they could sneak one by, and I suspect they'll be at it again.
I used to think Kansas was more conservative than most states, but liberalism creeps across the prairie....
I like that line of reasoning.
This is a shell game. School funding is a scam. Without spending cuts it is a waste of time What needs to be addressed is accountability, more money directed into the the classrooms and consolodation of rural school districts to cut back on administrative costs. If more revenue is needed try casino gambling. Works for Nevada and Lousiana and its a VOLUNTARY tax. Don't wanna pay, don't go to play.
It's an airborne virus, like ebola.
Hey, I tell people I moved here to escape the rampant political corruption of Pennsylvania!!
Texas needs more revenue?
Just do what they do in Florida. Build more toll roads, promise they'll only collect the tolls until the roads are paid for... Well you get the idea.
Kansas is peopled by the descendents of those who set out on the Oregon trail but dropped out of the pack early.
the governments appetite for taxes is endless. We are a Republic no more. We have morphed into a dying Socialist hell where the individual means nothing, limited government is a joke and everyone must worship at the alter of the State. If the US is this bad, I can only imagine how bad much of the rest of the world must be. I wonder how many Republicans in Texas voted for this? It seems that in Texas and most other states its, Republicans = Democrats = high taxes.
Like Gov Good Hair many of the republicans in the state of Taxes (Spelling is changed on purpose) were dems and I think though their party has changed their views have not.
good point. I wish more would see it this way. Limited government is a distant dream.
Slow learners. Taxachusetts has been running this racket for years.
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