A car tag proposal touted by Governor Keating and House Republican legislators does nothing to reform Oklahoma's flawed excise tax system and therefore is not a reasonable resolution of the ongoing tag debate, according to the author of HB 2663, the tag reform measure vetoed by the Governor.
Senator Jim Maddox has been working to see if a compromise on the tag issue is possible during the final days of the legislative session.
"The proposal that they've been pushing doesn't have one ounce of reform in it. Instead of creating a fair system where everyone is treated the same, it keeps the same old, crazy process that forces many Oklahomans to carry a greater share of the tax load than others," the Lawton legislator said.
While the GOP plan did not change the current excise tax system, Senator Maddox's tag proposal would have reformed it, assessing the tax on the actual sales price of a vehicle. Currently, new car buyers are required to pay tax on the sticker price of a vehicle, which is generally higher than the actual sales price, while used car buyers pay tax on a total determined by a state depreciation formula, which is generally lower than the actual
The end result is an unfair system that forces new car buyers to carry a greater share of the tax load than buyers of used vehicles, according to Maddox.
For example, a fictional new car buyer would be required to pay tax on a $26,000 sticker price, even if the actual sales price was just $22,000. In contrast, a used car buyer who bought a vehicle for the same price, $22,000, may be assessed tax at only $15,000 because that was the artificial value determined by the state's depreciation formula.
"Two different people pay the same price for vehicles, but one gets taxed at a higher level than the other. That's not fair, but that's exactly what the Governor and the House Republicans are fighting to uphold," said Senator Maddox.
The people who fare the best under the current excise tax system are buyers of old classic cars. For example, someone who bought a 1961 Corvette for $70,000 would pay the minimum excise tax under the state depreciation formula - just eight dollars. The tax would be the same for someone who bought a 1950 Rolls Royce for $200,000.
"I don't think someone who buys a $200,000 Rolls Royce should pay less tax than a guy who goes out and buys a new Chevy pickup truck, but under the crazy tax system we have, that's how it works out. The average Joe gets the short end of the stick," said Senator Maddox.
Given the inequities of the current system, the Lawton legislator challenged its proponents to defend it.
"In all of the rhetoric they've recited, I've never heard them once try to defend the crazy system that they're endorsing. If they really think that they have a good proposal, I'd invite them to explain to Oklahomans why they think an unequal system of taxation is such a great idea," Senator Maddox said.
Citing their opposition to excise tax reform, all but one House Republican voted against Maddox's tag reform bill, even though it reduced tag fees to no more than $85 per year. Governor Keating echoed their excise tax argument when he vetoed the bill last week.
"They killed a bill that would have given Oklahomans $85 tags because they didn't want to reform a system that charges different people different taxes when they pay the same price for a car. Because of them, tag fees are still too high and car taxes are still unfair. I don't see any sense in that," noted Maddox.
While Senator Maddox and others are still working to see if another compromise bill is possible in the final days of session, legislative leaders are considering bypassing the Governor and putting the car tag reform measure directly to a vote of the people.