Revenge of The Taxinator
What’s new in Schwarzenegger’s ‘car tax’ hike is really old and only getting more so
By Jennifer Hadley 04/16/2009
Once upon a time — oh, let’s say, November 2003 — our spanking new (read: utterly inexperienced) governor, Arnold “The Terminator” Schwarzenegger, came into office facing a $38 billion state budget shortfall. True to his word, hours after his inauguration Arnold repealed the DMV fee increases (aka “the car tax”) which had tripled under recalled Gov. Gray Davis. When Davis was governor, DMV fees had risen to 2 percent of the value of the vehicle. By contrast, The Governator dropped those fees to .65 percent, where they had remained until now. As car owners and buyers, we seemed destined to live happily ever after. But unlike a good fairy tale, our 5-year-long ride on Easy Street doesn’t come with a storybook ending.
Instead, the days of car-buying bliss are destined for the history books. Consider that five-and-a-half years after Arnold took office, instead of a $38 billion deficit, the state is now $42 billion in the hole. However, this time Schwarzenegger’s not cutting car buyers or car owners any slack. In fact, he’s socking it to us, despite the fact that more than 10 percent of Californians are unemployed.
Effective May 19, DMV fees will rise one-half of one percent — to 1.15 percent of the value of your car. That means that if your renewal fees are due after May 19, or you purchase a car after that date, your DMV fees will nearly double. So, if your car is valued at $20,000, you can expect to pay $230 in DMV fees this year, as opposed to the $130 fee you paid last year. Naturally, this increase applies to all vehicles you own or purchase (and will remain in effect until at least June 30, 2011, with the possibility of an extension until 2013), so if you happen to own more than one car, well … good luck.
As no riveting story is complete without a back-story, I remind you that the DMV fee increase comes on the heels of the one-percent state sales tax increase, which went into effect April 1, bringing our sales tax up from 8.25 percent to 9.25 percent. That $20,000 car you bought in March would have run you $1,650 in sales tax. Today, you’ll pay $1,850.
But wait! There’s yet another twist coming our way in this page-turner. Remember Measure R that we passed in L.A. County back in November? (We voted for an additional half-percent sales tax increase for the next 30 years, for transportation improvements.) That hike will hit our wallets in July, bringing our sales tax to a whopping 9.75 percent (and some cities within LA County will see their taxes climb into the double digits). As a result, taxes you’ll be paying on that $20,000 car this summer will increase again by another $100.
Aside from the laughable (as in “are you kidding me?”) fact that our state is in an even worse fiscal mess than it was five years ago, our transportation saga boasts another ridiculous twist. This, of course, is the fact that our economy as a whole is in the toilet and we desperately need consumers to stimulate it by purchasing goods (ideally, expensive goods, such as cars). Yet new laws, taxes and fees are making this prospect less affordable by the day. In fact, when all is said and done, in just three months the car that would have cost you $21,780 (with all taxes and fees) on March 31 will cost you $22,180 on July 1.
So where’s the moral of the story? The truth is I can’t find one. But I’ll tell you how I hope this doesn’t end. I truly hope that these tax increases and fee increases don’t steer too many people away from buying cars for too long. And while I’m engaging in a little wishful thinking, a hero coming to save us all from this economic mess would also be a welcome addition, in my book.
Contact Jennifer Hadley at email@example.com.