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Post Office Box 1147
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Marblehead, Massachusetts 01945
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“Every Tax is a Pay Cut ... A Tax Cut is a Pay Raise”
48 years as “The Voice of Massachusetts Taxpayers”
— and
their Institutional Memory — |
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CLT UPDATE
Monday, January 17, 2022
Surprise Hike In Mass.
Auto Excise Coming?
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to CLT's Commentary on the News
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Most Relevant News
Excerpts
(Full news reports follow Commentary)
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A new tax
on Massachusetts millionaires would add about $1.3
billion in revenue for the state, according to a new
report that analyzes the potential impact of the
proposed surtax on high-income earners that voters
will consider on the ballot in November.
Massachusetts lawmakers voted last year to put a
constitutional amendment on the 2022 ballot that
would add a 4 percent surtax on household income
above $1 million, pledging to dedicate the
additional revenue to just two areas of spending:
education and transportation.
The
analysis done by the Center for State Policy
Analysis at Tufts University offers a fresh estimate
of how much money could be generated by the tax code
change, and it largely confirms revenue projections
made last year by the Beacon Hill Institute, though
without as many dire warnings of the tax's impact on
the economy.
The report
estimates that if approved by voters the new tax
would be collected from about 21,000 state
taxpayers, or less than 1 percent of all households
in the state, who earn about 22 percent of all
taxable income in Massachusetts. Using state and
federal data, the center estimated that 2,000
households earned more $5 million in 2019 totaling
11 percent of all income in the state.
The
projection takes into account the likelihood that
some high-earners could leave Massachusetts as a
result of the policy, while others will engage in
"tax avoidance" strategies to lower their tax
burden.
"Some
high-income residents may relocate to other states,
but the number of movers is likely to be small," the
report concludes, relying on research done in other
states like California and regions of Spain that
suggest Massachusetts could lose 500 families and
about $100 million in tax revenue from
relocation....
Moves out
of state and tax avoidance measures are projected to
reduce the state's overall revenue from the income
surtax by 35 percent in 2023, down from a possible
$2.1 billion if no behavioral changes were accounted
for. The report attributed about $670 million of the
lost revenue to tax avoidance.
"Even
accounting for that, it still seems like an approach
that will raise substantial revenue and in a way
that advocates say it will from higher earners in a
progressive way," said Evan Horowitz, executive
director of the Center for State Policy Analysis.
A new
poll released Thursday from the MassINC Polling
Group found that 70 percent of registered voters
support the ballot question, including 44 percent
who said they strongly support a surtax that would
be spent on transportation and education. Only 10
percent of those surveyed said they were still
unsure....
One
unknown, the report acknowledges, is how the money
will be invested.
While the
ballot question states that it must be spent on
education and transportation, all state spending is
still subject to appropriation by the Legislature
and there's the risk that the money, once pooled
together with other revenues, will be used to
replace existing spending instead of solely to
increase investments.
State
House News Service
Thursday, January 13, 2022
Study Pegs Wealth Surtax Haul At
$1.3 Billion
Relocations, Tax Avoidance Will Reduce Take By $670
Million
CLICK HERE OR IMAGE ABOVE TO WATCH
The
Massachusetts Fiscal Alliance held a press
conference Thursday afternoon to express
opposition to a 4 percent surtax on incomes
above $1 million that is slated to go before
voters in November in the form of a
constitutional amendment. [Screenshot]
Opponents
of a plan to change the constitution to allow a 4
percent surtax on household incomes above $1 million
pushed back Thursday on one finding from a new study
and refuted suggestions that the new revenue would
be spent only on transportation and education.
Residents
will vote on the measure, dubbed the "fair share
amendment" by proponents, during the November
election after legislators voted 159-41 in June 2021
to place it on the ballot. A new poll released by
the MassINC Polling Group Thursday showed 70 percent
of registered voters in support of the question....
At a
virtual press conference Thursday hosted by the
Massachusetts Fiscal Alliance, lawmakers and
researchers suggested the Legislature could decide
to allocate revenue from the amendment to different
areas.
"The state
constitution specifically prohibits earmarking
funds, revenue," said Rep. David DeCoste
(R-Norwell). "Since the Legislature appropriates
revenue, only the Legislature will have the final
word in terms of what will be spent and for what.
The idea that these funds will somehow be fenced for
transportation and education is really unrealistic."
The
amendment's language says revenues from the surtax
can only be used "for quality public education and
affordable public colleges and universities, and for
the repair and maintenance of roads, bridges and
public transportation."
But
opponents argue that even within those categories,
money can be "fungible." DeCoste called education
and transportation broad categories.
"Pensions
could be considered to fall under these categories,"
he said. "And for that reason, I think this is a bad
initiative and I will actively oppose it." ...
Rep.
Colleen Garry (D-Dracut) said the amendment does not
guarantee dollars will head to education and
transportation.
"I think
that it's extremely important that the truth be put
out there that we cannot assure anyone that going
forward, this money will be always spent on
education and transportation," she said. "It would
be up to whatever Legislature is in at that time to
make that determination. And they can always say, I
wasn't there when the promise was made, so I didn't
make the promise."
State
House News Service
Thursday, January 13, 2022
Wealth Surtax Opponents
State Their Case
Garry: Future Lawmakers Can Say "I Didn't Make That
Promise"
Opponents
of a millionaires’ tax before voters this fall say
the $1.3 billion in new annual income will cost Bay
Staters 9,000 lost jobs and drive out up to 4,000
high-earning families at a time when Massachusetts
is already “flush with cash.”
Massachusetts voters will decide on the measure,
dubbed the “fair share amendment” by proponents, in
the November election. It would add a 4% surcharge
on incomes over $1 million.
This is
the Legislature’s seventh attempt to pass a wealth
tax, but a new poll released by the MassINC Polling
Group Thursday showed this time it’s likely to
stick, with 70% of registered voters in support of
the question....
Opponents
also pushed back on ballot question language saying
revenue generated by the tax would be earmarked for
education and transportation funding.
“The state
constitution specifically prohibits earmarking
funds, revenue,” said Rep. David DeCoste, R-Norwell.
“Since the Legislature appropriates revenue, only
the Legislature will have the final word in terms of
what will be spent and for what. The idea that these
funds will somehow be fenced for transportation and
education is really unrealistic.”
The
Boston Herald
Thursday, January 13, 2022
Massachusetts
millionaires’ tax could generate $1.3 billion,
but with ‘high’ cost to jobs, taxable income
Legislative and Baker administration budget writers
are projecting that state tax revenue will grow by
2.7 percent next fiscal year, from the $35.948
billion they are now expecting the state to collect
in fiscal 2022.
Administration and Finance Secretary Michael
Heffernan and Ways and Means Committee chairs Sen.
Michael Rodrigues and Rep. Aaron Michlewitz are
required to jointly develop a revenue forecast each
year, which lawmakers and Gov. Charlie Baker use in
crafting their spending plans. Baker, who makes the
first volley in the annual budgeting process, is due
to file his bill by Jan. 26.
The trio
on Friday announced a consensus revenue forecast of
$36.915 billion for the fiscal year beginning July
1, which would make a maximum of $29.783 billion in
tax revenue available for the fiscal 2023 budget
after accounting for statutorily required transfers.
In conjunction with the announcement, Heffernan said
he is revising this year's revenue projection upward
by $1.548 billion based on year-to-date collections
and economic data. As of December, the state had
collected more than $17.8 billion in taxes so far
this fiscal year.
State
House News Service
Friday, January 14, 2022
Agreement on Tax Revenue
Estimate Kicks Off Budget Cycle
REVENUE
COMMITTEE: Revenue Committee holds a virtual hearing
on 66 bills related to the environment and farms --
including bills that deal with agricultural land or
climate change adaptation -- and sales and excise
taxes. The agenda includes bills that would reduce
the state's 6.25 percent sales tax to 5 percent, and
others that propose tax exemptions for gun safes and
trigger locks, zero-emission commercial vehicles,
certain medical supplies, purchases of Energy
Star-rated products and hybrid or electric cars on
Earth Day, and electric-vehicle chargers.
State
House News Service
Friday, January 13, 2022
Advances: Week of Jan. 16, 2022
An Act
relative to lowering the sales tax to 5%
By Mr.
Lombardo of Billerica, a petition (accompanied by
bill, House, No. 2992) of Marc T. Lombardo for
legislation to lower the sales tax to five percent.
Revenue.
Bill H.2992
SECTION 1.
Section 2 of Chapter 64H of the General Laws, as
appearing in the 2008 Official Edition, is hereby
amended by striking “6.25 per cent” and replacing it
with “5 per cent”.
SECTION 2.
Section 2 of Chapter 64I of the General Laws, as
appearing in the 2008 Official Edition, is hereby
amended by striking “6.25 per cent” and replacing it
with “5 per cent”.
The
Washington Post published an article on January 9
critical of the Iowa Senate for a new policy that
requires reporters to now observe senate proceedings
from a viewing gallery, as is customary in most
other state legislatures. Journalists had previously
been permitted on the floor of the Iowa Senate,
something unique to the Hawkeye State. Yet, while
the Washington Post deems this rule change in Iowa
worthy of national coverage, the paper hasn’t
published anything on what is arguably the least
transparent state legislative body in country: the
Massachusetts statehouse.
In 1766, a
decade before the Declaration of Independence was
written, the Massachusetts House of Representatives
constructed a viewing gallery, the first to do so
among the thirteen colonial legislatures, for the
public to witness debates and legislative
proceedings. In his latest book, “Power & Liberty,”
historian Gordon Wood described the creation of a
public gallery in the Massachusetts statehouse as
“an important step in the democratization of
American political culture.”
Yet,
whereas Massachusetts had been a historical leader
in transparency in government even prior to the
nation’s founding, today the commonwealth is
arguably the least transparent state government in
the entire United States....
“There is
no legislative body in America as opaque as the
Massachusetts Legislature,” says Paul Craney,
spokesman for the Massachusetts Fiscal Alliance, a
non-partisan taxpayer organization. “They have
gotten away with passing billion dollar budgets
without a vote, passing new taxes without a vote,
making some of their votes not available to the
public.” ...
Massachusetts legislators have even gone so far as
to refuse to implement ballot measures that have
been approved by voters. In 2000, for example,
Massachusetts residents voted in favor of Question
4, a ballot measure that rolled back the state
income tax rate from 5.95% to 5.0%. Yet state
lawmakers decided to delay implementation of that
tax rollback, despite the fact that 56% of
Massachusetts cast ballots in favor.
“Instead,
Beacon Hill dropped the tax rate to 5.3% and passed
a law conceding the rest — but only in small doses,
and only if the state met certain financial
targets,” explained Governing Magazine. “The first
of those steps didn’t come for another decade.” ...
Though the
income tax cut approved by Massachusetts voters was
finally implemented by lawmakers, albeit 20 years
later, it’s not lost on many Massachusetts residents
that state lawmakers refused to carry out the will
of voters so that they could tax more of their
income. "And to think about the billions of dollars
that the state government has siphoned from
taxpayers' wallets during all those years," said
Chip Ford, executive director of Citizens for
Limited Taxation, the organization that led the
campaign in favor of Question 4 back in 2000. "It's
disgraceful." ...
If the
Washington Post and other national outlets are
looking for a statehouse that is lacking in
government transparency, they would do well to turn
their attention to the golden dome on Boston’s
Beacon Hill.
Forbes
Wednesday, January 12, 2022
In Massachusetts, Once A Leader In
Government Transparency,
Key Votes Are Hidden From The Public
By Patrick Gleason
Kentuckians could see property taxes on their cars
and trucks leap this year when renewing their
vehicle registrations.
Like with
many rising prices these days, COVID is to blame.
Supply shortages caused by the pandemic have made
new vehicles scarce, pushing buyers to previously
owned options, which in turn has increased used car
values.
In
Kentucky, where property tax is assessed each year
on the value of motor vehicles, this spells a likely
uptick in what people will owe.
For
instance, Wayne County resident Randy Bauer was told
by local officials that his 2019 Toyota 4Runner,
which he bought in late 2018 for about $38,000, has
a 2022 valuation of around $42,000.
“I’ve
never had vehicles appreciate, especially when they
appreciate over what you’ve paid for them brand
new,” Bauer told Reader’s Watchdog, adding he’ll owe
just under $500 in taxes.
Car
values, overall, are jumping about 40% this year
compared to last year, according to a letter sent by
the Kentucky Department of Revenue to county
officials.
The state
updates these trade-in values yearly through its
vendor, market research firm J.D. Power.
In the
letter, the revenue department cites well-documented
recent trends in the automobile industry, including
new vehicle production constraints — due to computer
chip shortages, for one — increased new vehicle
prices and limited used car supply, as factors
contributing to the jump in used car prices.
Bauer, who
moved to Kentucky last year, said it seemed unfair
to him to be taxed on an inflated value of his
vehicle.
“They
ought to be able to leave it the way it is and not
raise it,” Bauer said....
In
response to the likely tax increase, as of Jan. 12,
Kentucky legislators had filed at least four bills
addressing vehicle property taxes....
In 2020, a
2019 Toyota Corolla was valued at $13,450. Last
year, it dropped to $12,900 but this year
skyrocketed 48% to $19,050.
Based on a
Jefferson County average of $13.50 in taxes per
$1,000 of value, that means the tax on the Corolla
last year would have been $174 compared to $257 in
2022.
The
Courier Journal
Louisville, KY
Friday, January 14, 2022
Property taxes on
Kentuckians' cars and trucks are jumping |
|
It was another typical
crazy week at CLT, first putting together and delivering our
testimony for the
Joint Committee on Revenue hearing on Tuesday in which CLT
supported H.2881, a
long-overdue revision of the onerous Massachusetts estate tax.
Next came the Tufts University release of its Center for State
Policy Analysis
report on the effects the sixth graduated income tax
(aka, the "Millionaire's Tax," aka, the "Fair Share Amendment") if
the state constitutional amendment should be approved by the voters
in November.
That report was
accompanied on the same morning by a new
MassINC poll showing how wildly popular "taxing the rich" has
not-so-surprisingly become, with 70% of its respondents across the
board of
all
ages, stripes and persuasions supposedly in favor of it
— in fact the same respondents to the same
poll also strongly or somewhat support free or discounted public
transportation too.
Tax
hikes on others, more freebies for me. Do I perceive a pattern
in respondents and the the polling company's selection? Just
asking.
Coincidentally of course, both the poll and the report were released
on the same morning. The report by the Center for State
Policy Analysis at Tufts University
concerning the upcoming graduated income tax ballot question noted:
WHO WOULD PAY?
While very few households in Massachusetts earn over $1 million
in any given year, they account for a substantial share of total
income in the state.
In 2019 — the last year for which we have complete data — there
were 21,000 state taxpayers with incomes of more than $1
million, amounting to just 0.6 percent of all households. Yet
those households earned 22 percent of all taxable income in
Massachusetts.
The farther you go up the income ladder, the starker this
imbalance. Combining state and federal data, we estimate that
Massachusetts had around 2,000 households earning above $5
million in 2019, but those 0.06 percent of taxpayers garnered 11
percent of all income.
Salaries and paychecks comprise about a third of the income for
these million-dollar-a-year households; a similar amount comes
from capital gains, and another 20 percent is passed through
from business income.
Racial
inequities among big earners are trickier to pin down, as
publicly available tax data doesn’t generally capture details
about race or ethnicity. But separate surveys suggest that
non-Hispanic whites comprise nearly 90 percent of all
million-dollar earners in Massachusetts, and that white families
are three to four times more likely to earn seven figures than
Asian, Hispanic, or Black families.
Notice that according to
this report, "In 2019 — the last year for which we have complete
data — there were 21,000 state taxpayers with incomes of more than
$1 million, amounting to just 0.6 percent of all households.
Yet those households earned 22 percent of all taxable income in
Massachusetts."
Pay close attention here
folks. Viewed slightly differently, this translates to 21,000
state taxpayers — "amounting to just
0.6 percent of all households" — are
already paying the standard 5% income tax on a disproportionate
22 percent of all income taxes extracted by the state from all the
productive in Massachusetts. And that's still not
enough for The Takers and more never is.
In quick response to the
two morning releases and news reports on them we Grad Tax opponents
leaped into action, thanks to Paul Craney and MassFiscal setting up
a Zoom virtual news conference that noon.
CLICK HERE OR IMAGE ABOVE TO WATCH
Rep. Colleen Garry is a Democrat from Dracut.
Paul Craney introduced her as the first opposition speaker at our
press conference. She warned that the constitutional amendment
will not and cannot guarantee the revenue it proposes to raise will
all go to education and transportation as its supporters assert.
"I think
that it's extremely important that the truth be put
out there that we cannot assure anyone that going
forward, this money will be always spent on
education and transportation," she said. "It would
be up to whatever Legislature is in at that time to
make that determination. And they can always say, I
wasn't there when the promise was made, so I didn't
make the promise."
David Tuerck of the Beacon
Hill Institute spoke next then it was my turn. My first words
(at 11:58 minutes in) were in support of Rep. Garry's assertion.
I reminded all that legislative promises were made to be broken and
referenced the "temporary, 18-month" income tax hike of 1989 that
remained until CLT's successful 2000 ballot question finally forced
it back to 5 percent, finally thirty years later in 2020.
On June 23, 1997 when
called out on that broken promise eight years after it was made,
then-House Speaker Thomas Finneran responded:
"Maybe somebody at
the time said, 'Well, gee, maybe we should or maybe we could
consider rolling it back,' but Barbara [Anderson] has been
around long enough to know statements come and go and language
is statutory. I don't know how someone could attach
legitimacy to a comment made in the hall, in a hearing, or even
on the House floor."
CLT used
that quote by the then-House Speaker surrounded by
excerpts from contemporaneous 1989 newspaper reports
like "Dems eyeing temporary state income tax hike"
in which that legislative promise was prominently
repeated in a
flyer and newspaper ad we created during our
successful ballot question campaign.
Too many politicians lie
too often — case closed.
We were reminded again of
that 2000 ballot question campaign and the Legislature's
unscrupulous cupidity on Wednesday in an article published in
Forbes ("In Massachusetts, Once A
Leader In Government Transparency, Key Votes Are Hidden From The
Public") by Patrick Gleason of Americans for Tax Reform.
Here's an excerpt from it:
. . . Massachusetts
legislators have even gone so far as to refuse
to implement ballot measures that have been
approved by voters. In 2000, for example,
Massachusetts residents voted in favor of
Question 4, a ballot measure that rolled back
the state income tax rate from 5.95% to 5.0%.
Yet state lawmakers decided to delay
implementation of that tax rollback, despite the
fact that 56% of Massachusetts cast ballots in
favor.
“Instead, Beacon Hill
dropped the tax rate to 5.3% and passed a law
conceding the rest — but only in small doses,
and only if the state met certain financial
targets,” explained Governing Magazine. “The
first of those steps didn’t come for another
decade.” ...
Though the income tax cut
approved by Massachusetts voters was finally
implemented by lawmakers, albeit 20 years later,
it’s not lost on many Massachusetts residents
that state lawmakers refused to carry out the
will of voters so that they could tax more of
their income. "And to think about the billions
of dollars that the state government has
siphoned from taxpayers' wallets during all
those years," said Chip Ford, executive
director of Citizens for Limited Taxation,
the organization that led the campaign in favor
of Question 4 back in 2000. "It's disgraceful."
...
If the Washington Post and
other national outlets are looking for a
statehouse that is lacking in government
transparency, they would do well to turn their
attention to the golden dome on Boston’s Beacon
Hill.
Then
to top off the crazy week this surfaced in Kentucky which appears
will affect Massachusetts as well.
Kentucky motorists were just blindsided by a huge and unexpected
hike in its "motor vehicle tax" — the
equivalent of the Massachusetts auto excise (tax). Kentuckians
are
shocked, but fortunately the state's General Assembly (state legislature) is
in its brief annual session and legislators have already filed four
bills to turn back the surprise increase.
(The
Kentucky General Assembly convenes in regular session on the first
Tuesday after the first Monday in January for 60 days in
even-numbered years and for 30 days in odd-numbered years. The
Kentucky Constitution mandates that a regular session be completed
no later than April 15 in even-numbered years and March 30 in
odd-numbered years.)
You
know me — I can't let something like this pass without questioning
it, digging in to uncover if and how it might similarly impact Bay
State motorists and taxpayers.
What
I've found and present here is an advance warning to all, an alert. This
dynamic (what I call "Bidenflation") I strongly suspect will affect
the Massachusetts auto excise taxpayers as well, though I haven't
found any mention of it anywhere in Boston news
reports or my research — yet.
The
similarities are too close to not have the same effect.
At least in Kentucky there's a taxpayer-friendly supermajority in
its General Assembly that's already moving to stop the hike.
The Courier Journal (Louisville, KY) reported on
Friday ("Property taxes on Kentuckians'
cars and trucks are jumping"):
Kentuckians could see
property taxes on their cars and trucks leap
this year when renewing their vehicle
registrations.
Like with many rising
prices these days, COVID is to blame. Supply
shortages caused by the pandemic have made new
vehicles scarce, pushing buyers to previously
owned options, which in turn has increased used
car values.
In Kentucky, where property
tax is assessed each year on the value of motor
vehicles, this spells a likely uptick in what
people will owe....
Car values, overall, are
jumping about 40% this year compared to last
year, according to a letter sent by the Kentucky
Department of Revenue to county officials....
Bauer, who moved to
Kentucky last year, said it seemed unfair to him
to be taxed on an inflated value of his vehicle.
“They ought to be able to
leave it the way it is and not raise it,” Bauer
said....
In response to the likely
tax increase, as of Jan. 12, Kentucky
legislators had filed at least four bills
addressing vehicle property taxes....
In 2020, a 2019 Toyota
Corolla was valued at $13,450. Last year, it
dropped to $12,900 but this year skyrocketed 48%
to $19,050.
Based on a Jefferson County
average of $13.50 in taxes per $1,000 of value,
that means the tax on the Corolla last year
would have been $174 compared to $257 in 2022.
WHAS TV-11
(Louisville, KY) reported on the tax ("Kentucky's
car tax: How fair is it?") and how it's
calculated:
“On our projection report,
I think it was about $140 million.” Cathey
Thompson, the Department of Revenue State
Evaluation Division Director, said.
The county clerk gets four
percent for collection services on the local
level.
For example, a 2016 Mini
Cooper assessed at just over $19,000, a 2010
Ford Explorer at $5,650, and a 2006 Hyundai
Tucson at an even $2,600.
“It's ‘fair cash’ value,”
Thompson explained.
The Commonwealth's
Constitution (Section 172) defines ‘fair cash
value’ as the "price it would bring at a fair
voluntary sale" which the Kentucky Department of
Revenue interprets as a NADA ‘clean trade’.
Values based on the ‘clean
trade’ condition of a vehicle as of Jan. 1.
Those values defined by the
$124,000 annual subscription the Department has
with the "National Auto Dealers Association
(NADA)."
Here is the definition of a
clean trade from a NADA book: ’Clean’ represents
no mechanical defects and passes all necessary
inspections with ease. Paint, body, and wheels
may have some minor surface scratching with a
high gloss finish.
In Kelley Blue Book (KBB),
‘good’ condition is closest to NADA’s definition
of ‘clean trade’ condition.
But even in KBB’s ‘very
good’ condition, the trade price is
significantly disproportionate with NADA but
more in line with values on Cars.com which uses
Black Book....
Thompson said she is not
aware of the NADA giving them over inflated
prices.
“From what I’ve been told
that NADA more closely represents the ‘fair
cash’ value, which is a sale between a willing
buyer and a willing seller,” Thompson said....
Used car director Brian
Ubelhart has assessed thousands of cars and
believes it is hard for most vehicles on the
road to meet the ‘clean trade’ standard.
“It's almost impossible for
any car with several years and tens-of-thousands
of miles on it to be a ’clean trade’,” Ubelhart
said....
"In the 'clean' to
'excellent' condition, you're looking at 5% of
the cars that we look at," Ubelhart explained,
“most of the time it's just unrealistic”.
Ubelhart said he believes
NADA has always overvalued vehicles....
The Kentucky Department of
Revenue pays NADA (National Automobile Dealers
Association) to provide it with an annual list
of assessments for each vehicle registered in
the commonwealth.
NADA is one of several
services car dealers, and in this case state
government, can use to determine vehicle values.
The Kentucky Department of
Revenue is required by the Commonwealth
Constitution Section 172 to assess property tax
"at its fair cash value, estimated at the price
it would bring at a fair voluntary sale".
NADA’s “Clean Trade-In”
value is the standard the state uses to tax.
The Massachusetts
Secretary of State's office publishes "Motor Vehicle Excise
Information" both on
its website and in
booklet
format. Here's the relevant excerpt regarding how it's
calculated:
Under MGL Chapter
60A, all Massachusetts residents who own and register a motor
vehicle must annually pay a motor vehicle excise. Also,
under MGL Chapter 59, Section 2, it is important to note that
every motor vehicle, whether registered or not, is subject to
taxation, either as excise or personal property, for the
privilege of road use, whether actual or future. The
excise is levied by the city or town where the vehicle is
principally garaged and the revenues become part of the local
community treasury....
Bill Computation
An excise at
the rate of $25 per one thousand dollars of valuation (effective
1/1/81) is levied on each motor vehicle. Information on
the value of a motor vehicle is accessed electronically through
a data bank complete with valuation figures. Different
sources provide the valuation figures depending upon whether the
motor vehicle is an automobile, a truck, a motorcycle, or a
trailer. For example, automobile valuations are derived
from figures published in the National Automobile Dealers
Association Official Used Car Guide (NADA), to which the
Registry has electronic access. Most public libraries
have copies of NADA and other motor vehicle official guides.
Note the effective date when the rate of $25 per one thousand dollars of valuation
became law: January 1, 1981. That was the direct result
of CLT's Proposition 2½. Along with
limiting the increase of property taxes Prop 2½ also reduced the auto
excise (tax) from $66 per $1,000 valuation to $25 per $1,000.
(How
much does that one tax cut alone save you every year?)
• Both Kentucky and
Massachusetts use the National Automobile Dealers Association
Official Used Car Guide (NADA) to calculate their respective auto
excise/motor vehicle taxes.
• NADA is
automatically adding the 40% inflation factor on new and used
vehicles to what it's providing state subscribers of its service —
which includes both Kentucky and Massachusetts.
• Kentucky has begun
to automatically build those NADA-provided inflation increases into
its motor vehicle tax bills.
• Does anybody
think the same won't happen in Massachusetts as well?
I'll be digging deeper in
the days ahead. The least CLT can do is spread the word that
it's coming, as Paul Revere did.
— UPDATE —
Correction
Since this was sent out to
members as an e-mailed CLT Update earlier today it was brought to my
attention by two of them that in fact Massachusetts calculates its
auto excise tax by a different, newer formula. Upon reading
the above alert both John G. of Whitman, and former chairman of
CLT's board of directors Attorney Paul Nicolai, contacted me with
the correction. Paul told me: "The Massachusetts auto
excise tax used to be calculated on NADA Blue Book. It's no
longer the case. It is now calculated on MSRP."
Here's the excerpt from
the Secretary of State's website detailing how the Massachusetts
auto excise tax is calculated today:
For a detailed explanation
with examples also provided by the Secretary of State's office see:
Calculation Of The Excise Amount
The newer state
calculation is based on a percentage of the "manufacturer's list
prices for vehicles in the year of manufacturer" (also called the
Manufacturer's Suggest Retail Price, or the MSRP) and the age of the
vehicle being taxed.
"The excise tax law
... establishes its own formula for valuation for state tax
purposes whereby only the manufacturer's list price and the age
of the motor vehicle are considered."
My thanks to John and Paul
for the quick correction.
I then wondered if, since
the cost of a new vehicle today (if you can find one) has been much
higher due to shortages than the cost of last year’s new models,
will that have any impact on the percentage trickle-down effect in
ensuing years?
John replied: "Some
cars are now being sold at a “premium” rather than a “discount” from
the MSRP. If somebody pays, say, $4,000 over MSRP, will the
excise tax be based on the MSRP or the sales price? I suspect
that the answer is “the MSRP” but I don’t know. Probably a
question better directed to the Dept. of Revenue.
"Certainly, to the extent
that the MSRP increases from one model year to the next, that
results in an increase in the excise tax. But that’s different
from the atypical price increases that are being caused by the
shortages now."
I suppose my question is a
hypothetical one for down the road.
At least my greatest
concern has been removed, that Massachusetts was caught up in the
same unexpected situation as Kentucky (and likely a few of the other
states that impose a motor vehicle/auto excise tax).
Massachusetts has avoided that problem by having revised its excise
tax calculation in the past. Hurrrah!
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Chip Ford
Executive Director |
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State House News
Service
Thursday, January 13, 2022
Study Pegs Wealth Surtax Haul At $1.3 Billion
Relocations, Tax Avoidance Will Reduce Take By $670 Million
By Matt Murphy
A new tax on Massachusetts millionaires would add about $1.3
billion in revenue for the state, according to a new report
that analyzes the potential impact of the proposed surtax on
high-income earners that voters will consider on the ballot
in November.
Massachusetts lawmakers voted last year to put a
constitutional amendment on the 2022 ballot that would add a
4 percent surtax on household income above $1 million,
pledging to dedicate the additional revenue to just two
areas of spending: education and transportation.
The analysis done by the Center for State Policy Analysis at
Tufts University offers a fresh estimate of how much money
could be generated by the tax code change, and it largely
confirms revenue projections made last year by the Beacon
Hill Institute, though without as many dire warnings of the
tax's impact on the economy.
The report estimates that if approved by voters the new tax
would be collected from about 21,000 state taxpayers, or
less than 1 percent of all households in the state, who earn
about 22 percent of all taxable income in Massachusetts.
Using state and federal data, the center estimated that
2,000 households earned more $5 million in 2019 totaling 11
percent of all income in the state.
The projection takes into account the likelihood that some
high-earners could leave Massachusetts as a result of the
policy, while others will engage in "tax avoidance"
strategies to lower their tax burden.
"Some high-income residents may relocate to other states,
but the number of movers is likely to be small," the report
concludes, relying on research done in other states like
California and regions of Spain that suggest Massachusetts
could lose 500 families and about $100 million in tax
revenue from relocation.
The reason for the small number of relocations, the report
suggests, is that wealthy families tend to be connected to
their communities with kids in schools and other ties, while
those that do move are likely to be the wealthiest of the
payers. Some taxpayers may simply shift their permanent
residence out of state, while remaining in Massachusetts for
much of the year, the report contends.
Moves out of state and tax avoidance measures are projected
to reduce the state's overall revenue from the income surtax
by 35 percent in 2023, down from a possible $2.1 billion if
no behavorial changes were accounted for. The report
attributed about $670 million of the lost revenue to tax
avoidance.
"Even accounting for that, it still seems like an approach
that will raise substantial revenue and in a way that
advocates say it will from higher earners in a progressive
way," said Evan Horowitz, executive director of the Center
for State Policy Analysis.
A new poll released Thursday from the MassINC Polling Group
found that 70 percent of registered voters support the
ballot question, including 44 percent who said they strongly
support a surtax that would be spent on transportation and
education. Only 10 percent of those surveyed said they were
still unsure.
While the Center for State Policy Analysis arrived at
similar projections as a study done by the more conservative
Beacon Hill Institute last year, Horowitz said he does not
see the same risk to the state's economy.
Both independent estimates are lower than the $1.6 billion
to $2.2 billion projected by the Department of Revenue in
2015, though the state agency did not attempt to factor in
behavorial changes such as relocation.
"Our static estimate is very similar to their," Horowitz
said of DOR.
The Beacon Hill Institute projected the wealth surtax would
generate $1.23 billion in new taxes in 2023, but also said
it would cost the state 9,329 private sector jobs in the
first year and reduce the number of working households by
4,388, mostly due to high earners leaving Massachusetts for
lower cost states. The think-tank forecast a $431 million
decrease in gross state product, a $931 million decrease in
real disposable income and $7 million in lost investments.
Horowitz, however, said the impact on the Massachusetts
economy is likely to be "small."
"The reasons we come to similar numbers is totally
different. We don't see the substantial risk from depressed
economic activity and large number of people moving out of
state," Horowitz said. "It's chiefly an accounting issue,
not an economic one."
The report attributes its more optimistic economic forecast
to the relatively small size of the tax increase compared to
the overall economy and the fact that while avoidance
measures will decrease the state's tax haul on paper it will
not reduce significantly the amount of wealth available to
be spent and invested in the economy.
"Critics of the proposal sometimes argue that it would cost
jobs and blunt economic growth. But just as decades of
research on tax cuts have failed to reveal large stimulative
effects, tax increases of this size are unlikely to
meaningfully dampen economic activity," the report says.
One unknown, the report acknowledges, is how the money will
be invested.
While the ballot question states that it must be spent on
education and transportation, all state spending is still
subject to appropriation by the Legislature and there's the
risk that the money, once pooled together with other
revenues, will be used to replace existing spending instead
of solely to increase investments.
CLICK HERE OR IMAGE ABOVE TO WATCH
The
Massachusetts Fiscal Alliance held a press
conference Thursday afternoon to express
opposition to a 4 percent surtax on incomes
above $1 million that is slated to go before
voters in November in the form of a
constitutional amendment. [Screenshot]
State House News
Service
Thursday, January 13, 2022
Wealth Surtax Opponents State Their Case
Garry: Future Lawmakers Can Say "I Didn't Make That Promise"
By Chris Van Buskirk
Opponents of a plan to change the constitution to allow a 4
percent surtax on household incomes above $1 million pushed
back Thursday on one finding from a new study and refuted
suggestions that the new revenue would be spent only on
transportation and education.
Residents will vote on the measure, dubbed the "fair share
amendment" by proponents, during the November election after
legislators voted 159-41 in June 2021 to place it on the
ballot. A new poll released by the MassINC Polling Group
Thursday showed 70 percent of registered voters in support
of the question.
In advocating for the constitutional amendment, supporters
have said it could raise $2 billion per year that would be
directed towards education and transportation needs. Among
other things, they have pointed to a need to fund the
Student Opportunity Act, a law crafted to direct $1.5
billion to K-12 schools over seven years.
A study released Wednesday from the Center for State Policy
Analysis at Tufts University showed the amendment would draw
in about $1.3 billion in revenue for the state. The $700
million difference accounts for some high-earning people
leaving the state and use of "tax avoidance" strategies to
lower tax burdens.
At a virtual press conference Thursday hosted by the
Massachusetts Fiscal Alliance, lawmakers and researchers
suggested the Legislature could decide to allocate revenue
from the amendment to different areas.
"The state constitution specifically prohibits earmarking
funds, revenue," said Rep. David DeCoste (R-Norwell). "Since
the Legislature appropriates revenue, only the Legislature
will have the final word in terms of what will be spent and
for what. The idea that these funds will somehow be fenced
for transportation and education is really unrealistic."
The amendment's language says revenues from the surtax can
only be used "for quality public education and affordable
public colleges and universities, and for the repair and
maintenance of roads, bridges and public transportation."
But opponents argue that even within those categories, money
can be "fungible." DeCoste called education and
transportation broad categories.
"Pensions could be considered to fall under these
categories," he said. "And for that reason, I think this is
a bad initiative and I will actively oppose it."
Sen. Jason Lewis, a co-sponsor of the amendment in the
Legislature, said he "fully expects" future Legislatures to
spend the additional funding on education and
transportation.
"The language of the ballot question, which again, will be
in our state constitution, says very clearly that this money
needs to be spent only on education and transportation," he
told the News Service. "I think that gives very clear
direction to future Legislatures and governors."
Rep. Colleen Garry (D-Dracut) said the amendment does not
guarantee dollars will head to education and transportation.
"I think that it's extremely important that the truth be put
out there that we cannot assure anyone that going forward,
this money will be always spent on education and
transportation," she said. "It would be up to whatever
Legislature is in at that time to make that determination.
And they can always say, I wasn't there when the promise was
made, so I didn't make the promise."
In arguing against the ballot question, MassFiscal spokesman
Paul Craney pointed to a June 2018 Supreme Judicial Court
ruling that prohibited an earlier version of the income
surtax from appearing on the ballot. Justices ruled the
question -- as written at the time -- improperly mixed two
different spending areas and a significant change in tax
policy.
The court said voters who supported the tax but did not
support earmarking funds for education or transportation and
voters who wanted to designate funds to those areas but did
not back the tax were placed in untenable positions.
Speakers at the Massachusetts Fiscal Alliance press
conference also warned that high-earning individuals may end
up leaving the state as a result of the 4 percent tax on
incomes above $1 million.
The Tufts University study acknowledged that some
high-income residents may relocate, "but the number of
movers is likely to be small." The report concludes that 500
families could end up leaving the state and Massachusetts
could lose roughly $100 million in tax revenue from
relocation.
Rep. Nicholas Boldyga (R-Southwick) said top earners in
Massachusetts "are going to flee the state in droves" as a
result of the amendment and "we're going to be left in a
much worse position."
"Everyone here in the commonwealth can agree upon that when
the wealthiest of the residents of our state see the biggest
tax increases, they are the people that actually have the
resources to pack up and establish residency elsewhere," he
said.
Lewis believes this line of thinking is just a scare tactic.
"That's always been a scare tactic that opponents of the
fair share amendment have used, that this would drive lots
of people to leave Massachusetts and I think that's not
borne out by the experience in other states and other
countries," Lewis said.
Rep. Marc Lombardo (R-Billerica) said Massachusetts is flush
with cash as the state had over $5 billion in revenue above
benchmark last fiscal year and is billions above benchmark
halfway through this fiscal year.
"Massachusetts has money coming in, we have more than enough
to fund these critical programs that we need without raising
taxes on the hard-working families," he said.
The Boston
Herald
Thursday, January 13, 2022
Massachusetts millionaires’ tax could generate $1.3 billion,
but with ‘high’ cost to jobs, taxable income
By Erin Tiernan
Opponents of a millionaires’ tax before voters this fall say
the $1.3 billion in new annual income will cost Bay Staters
9,000 lost jobs and drive out up to 4,000 high-earning
families at a time when Massachusetts is already “flush with
cash.”
Massachusetts voters will decide on the measure, dubbed the
“fair share amendment” by proponents, in the November
election. It would add a 4% surcharge on incomes over $1
million.
This is the Legislature’s seventh attempt to pass a wealth
tax, but a new poll released by the MassINC Polling Group
Thursday showed this time it’s likely to stick, with 70% of
registered voters in support of the question.
A new study from The Center For State Policy Analysis at
Tufts University found it could generate $1.3 billion in new
tax revenue annually.
That’s less than the $2 billion predicted by a state
Department of Revenue in a report several years ago but
still a “meaningful amount of money” for Massachusetts,
while only hiking taxes on the Bay State’s top 0.6% of
earners, the study states.
“The millionaires’ tax also could have some serious side
effects if top earners opt to leave the state or shield
their income to avoid paying,” the Tufts University study
points out, saying “the number of movers is likely to be
small.”
The report concludes that 500 families could end up leaving
the state and Massachusetts could lose roughly $100 million
in tax revenue from relocation.
David Tuerck with the Beacon Hill Institute produced it’s
own financial predictions for the so-called millionaires’
tax. While its prediction that it would raise about $1.2
billion in new annual revenue is close to the Tufts figure,
Tuerck said “that’s the only similarity.”
Tuerck said the tax hike would “kill” 9,000 jobs in the
first year and cause up to 4,000 high-earning Massachusetts
families to relocate — a “much bigger” economic hit than the
Tufts report predicts.
State Rep. Nicholas Boldyga, R-Southwick, said top earners
in Massachusetts “are going to flee the state in droves” to
avoid the tax, leaving the commonwealth “in a much worse
position.”
State Rep. Marc Lombardo, R-Billerica, said “the reality is
that Massachusetts is flush with cash,” arguing
Massachusetts has no need to raise taxes on the wealthy with
so much green flowing in already.
The state had over $5 billion in revenue above benchmark
last fiscal year and is already billions above benchmark
halfway through this fiscal year. Billions more still have
flown into the state over the past two years in the form of
federal coronavirus funds, more than $2 billion of which
remain unspent.
“Massachusetts has money coming in, we have more than enough
to fund these critical programs that we need without raising
taxes on the hard-working families,” he said.
Opponents also pushed back on ballot question language
saying revenue generated by the tax would be earmarked for
education and transportation funding.
“The state constitution specifically prohibits earmarking
funds, revenue,” said Rep. David DeCoste, R-Norwell. “Since
the Legislature appropriates revenue, only the Legislature
will have the final word in terms of what will be spent and
for what. The idea that these funds will somehow be fenced
for transportation and education is really unrealistic.”
State House News
Service
Friday, January 14, 2022
Agreement on Tax Revenue Estimate Kicks Off Budget Cycle
By Katie Lannan
Legislative and Baker administration budget writers are
projecting that state tax revenue will grow by 2.7 percent
next fiscal year, from the $35.948 billion they are now
expecting the state to collect in fiscal 2022.
Administration and Finance Secretary Michael Heffernan and
Ways and Means Committee chairs Sen. Michael Rodrigues and
Rep. Aaron Michlewitz are required to jointly develop a
revenue forecast each year, which lawmakers and Gov. Charlie
Baker use in crafting their spending plans. Baker, who makes
the first volley in the annual budgeting process, is due to
file his bill by Jan. 26.
The trio on Friday announced a consensus revenue forecast of
$36.915 billion for the fiscal year beginning July 1, which
would make a maximum of $29.783 billion in tax revenue
available for the fiscal 2023 budget after accounting for
statutorily required transfers. In conjunction with the
announcement, Heffernan said he is revising this year's
revenue projection upward by $1.548 billion based on
year-to-date collections and economic data. As of December,
the state had collected more than $17.8 billion in taxes so
far this fiscal year.
The upgraded fiscal 2022 number assumes 5.3 percent growth
over fiscal 2021 collections, according to a Massachusetts
Taxpayers Foundation analysis, meaning the 2.7 percent
estimate for fiscal 2023 would represent a slowdown in
growth.
The fiscal 2023 estimate of $36.9 billion lands within the
range of possibilities experts offered at a December
hearing, when they said Massachusetts could expect at least
about $36.48 billion and possibly as much as nearly $40.8
billion next year, while flagging the continued uncertainty
of the pandemic and its economic toll.
"After some tumultuous budget cycles over the last several
years, this consensus revenue agreement for Fiscal Year 2023
is a reasonable and appropriate forecast that will allow the
Commonwealth to continue to provide the services our
constituents deserve, while at the same time preserving our
fiscal health," Michlewitz said. "Despite the pandemic, our
revenue intake continues to be better than anticipated,
proving the continued resiliency of the Commonwealth's
economy."
State House News
Service
Friday, January 13, 2022
Advances: Week of Jan. 16, 2022
Friday, Jan. 21, 2022
REVENUE COMMITTEE: Revenue Committee holds a virtual
hearing on 66 bills related to the environment and farms --
including bills that deal with agricultural land or climate
change adaptation -- and sales and excise taxes. The agenda
includes bills that would reduce the state's 6.25 percent
sales tax to 5 percent, and others that propose tax
exemptions for gun safes and trigger locks, zero-emission
commercial vehicles, certain medical supplies, purchases of
Energy Star-rated products and hybrid or electric cars on
Earth Day, and electric-vehicle chargers.
Lawrence Rep. F. Moran filed a bill to exempt from the sales
tax any retail sale made within 10 miles of the New
Hampshire border (H 3010). Rep. Ayers, Rep. Kearney and Sen.
O'Connor have each filed bills that would repeal the sales
tax on boats built in Massachusetts, while Sen. Barrett is
proposing to repeal the sales tax exemption for aircraft (S
1797).
A Rep. Michael Moran bill (H 3012) would allow the
Massachusetts Port Authority to tax and impose additional
regulations on transportation network companies like Uber
and Lyft.
Under a Rep. Domb bill (H 2874), a new Public Health and
Safety Fund would be seeded by an excise tax on guns and
ammunition.
A Rep. Fernandes bill (H 2894) would set up a Local
Newspaper Trust Fund and a Pre-K and After School Program
Trust Fund that would both be financed from a tax on digital
ads, like online banner ads and search engine advertising.
(Friday, 10 a.m.,
Agenda and Info)
Forbes
Wednesday, January 12, 2022
In Massachusetts, Once A Leader In Government Transparency,
Key Votes Are Hidden From The Public
By Patrick Gleason
The Washington Post published an article on January 9
critical of the Iowa Senate for a new policy that requires
reporters to now observe senate proceedings from a viewing
gallery, as is customary in most other state legislatures.
Journalists had previously been permitted on the floor of
the Iowa Senate, something unique to the Hawkeye State. Yet,
while the Washington Post deems this rule change in Iowa
worthy of national coverage, the paper hasn’t published
anything on what is arguably the least transparent state
legislative body in country: the Massachusetts statehouse.
In 1766, a decade before the Declaration of Independence was
written, the Massachusetts House of Representatives
constructed a viewing gallery, the first to do so among the
thirteen colonial legislatures, for the public to witness
debates and legislative proceedings. In his latest book,
“Power & Liberty,” historian Gordon Wood described the
creation of a public gallery in the Massachusetts statehouse
as “an important step in the democratization of American
political culture.”
Yet, whereas Massachusetts had been a historical leader in
transparency in government even prior to the nation’s
founding, today the commonwealth is arguably the least
transparent state government in the entire United States.
Two and a half centuries after being the first legislative
body to allow the public to view debates and proceedings,
today the Massachusetts Legislature is the only one in the
continental U.S. to have been closed to the public for the
entire duration of the pandemic (the Hawaii Legislature is
also closed to the public). Not far from the site of the
Boston tea party, today Bay State legislators raise taxes
behind closed doors, without so much as a recorded vote.
“There is no legislative body in America as opaque as the
Massachusetts Legislature,” says Paul Craney, spokesman for
the Massachusetts Fiscal Alliance, a non-partisan taxpayer
organization. “They have gotten away with passing billion
dollar budgets without a vote, passing new taxes without a
vote, making some of their votes not available to the
public.”
In addition to making laws and raising taxes in secret,
Massachusetts legislators have also refused to enacted
voter-approved citizen petitions. The abuse of authority and
concealing of the democratic process doesn’t stop there.
“Massachusetts legislators exempt themselves from the
state’s public records and open meeting laws and set their
salaries to rise at the rate of inflation, which resulted in
some part time lawmakers earning over $220,000 last year,”
adds Craney. “Until a strong minority party in the
legislature offers a contrast, and the public holds these
elected officials accountable, this type of opaque behavior
will continue to be tolerated.”
In 2009, Massachusetts legislators amended the state open
meetings law in order to centralize enforcement under the
state attorney general. Robert Ambrogi, then executive
director of the Massachusetts Newspaper Publishers
Association, said that he wasn’t even aware of the change
until after it had passed. There had been no public debate
on the matter, just as there is no public debate on many
important matters in the Massachusetts statehouse.
“A lot of the work of the Legislature takes place in
committee meetings and conference committees and all of that
happens outside the public eye,” Ambrogi added. “You want to
be able to see the deliberation and the thought process.”
One of the senior members of Massachusetts’ congressional
delegation, Congresswoman Katherine Clark (D-Mass.),
assistant speaker in the U.S. House of Representatives,
appeared NPR’s On Point on January 7 to bemoan alleged
threats to democracy and make the case for a federal
takeover of state-run elections systems that would outlaw
state voter ID laws and overturn state bans on ballot
harvesting. When asked if she has concerns about the opaque
manner in which the democratic process and legislative
business is conducted in her own state, Rep. Clark declined
to comment.
Massachusetts legislators have even gone so far as to refuse
to implement ballot measures that have been approved by
voters. In 2000, for example, Massachusetts residents voted
in favor of Question 4, a ballot measure that rolled back
the state income tax rate from 5.95% to 5.0%. Yet state
lawmakers decided to delay implementation of that tax
rollback, despite the fact that 56% of Massachusetts cast
ballots in favor.
“Instead, Beacon Hill dropped the tax rate to 5.3% and
passed a law conceding the rest — but only in small doses,
and only if the state met certain financial targets,”
explained Governing Magazine. “The first of those steps
didn’t come for another decade.”
It was only on January 1, 2020, more than two decades after
the rollback to 5% was approved by voters, that the state’s
income tax rate was finally reduced to 5.0%. In announcing
the completion of the rollback, Governor Charlie Baker (R)
said “we are finally making happen what voters called for
almost 20 years ago.”
Though the income tax cut approved by Massachusetts voters
was finally implemented by lawmakers, albeit 20 years later,
it’s not lost on many Massachusetts residents that state
lawmakers refused to carry out the will of voters so that
they could tax more of their income. "And to think about the
billions of dollars that the state government has siphoned
from taxpayers' wallets during all those years," said
Chip Ford, executive director of Citizens for Limited
Taxation, the organization that led the campaign in
favor of Question 4 back in 2000. "It's disgraceful."
The Washington Post reported that the decision in the Iowa
Senate to move journalists to a viewing gallery “raised
concerns among free press and freedom of information
advocates who said it is a blow to transparency and open
government that makes it harder for the public to
understand, let alone scrutinize, elected officials.” Yet,
unlike in the Massachusetts Legislature, the public is at
least allowed into the Iowa Legislature and can view state
legislative business in person. If the Washington Post and
other national outlets are looking for a statehouse that is
lacking in government transparency, they would do well to
turn their attention to the golden dome on Boston’s Beacon
Hill.
The Courier Journal
(Louisville, KY)
Friday, January 14, 2022
Property taxes on Kentuckians' cars and trucks are jumping.
Here's why and what you can do
By Matthew Glowicki
Kentuckians could see property taxes on their cars and
trucks leap this year when renewing their vehicle
registrations.
Like with many rising prices these days, COVID is to blame.
Supply shortages caused by the pandemic have made new
vehicles scarce, pushing buyers to previously owned options,
which in turn has increased used car values.
In Kentucky, where property tax is assessed each year on the
value of motor vehicles, this spells a likely uptick in what
people will owe.
For instance, Wayne County resident Randy Bauer was told by
local officials that his 2019 Toyota 4Runner, which he
bought in late 2018 for about $38,000, has a 2022 valuation
of around $42,000.
“I’ve never had vehicles appreciate, especially when they
appreciate over what you’ve paid for them brand new,” Bauer
told Reader’s Watchdog, adding he’ll owe just under $500 in
taxes.
Car values, overall, are jumping about 40% this year
compared to last year, according to a letter sent by the
Kentucky Department of Revenue to county officials.
The state updates these trade-in values yearly through its
vendor, market research firm J.D. Power.
In the letter, the revenue department cites well-documented
recent trends in the automobile industry, including new
vehicle production constraints — due to computer chip
shortages, for one — increased new vehicle prices and
limited used car supply, as factors contributing to the jump
in used car prices.
Bauer, who moved to Kentucky last year, said it seemed
unfair to him to be taxed on an inflated value of his
vehicle.
“They ought to be able to leave it the way it is and not
raise it,” Bauer said.
Kentucky legislature eyes car taxes
In response to the likely tax increase, as of Jan. 12,
Kentucky legislators had filed at least four bills
addressing vehicle property taxes.
House Bill 6 would require the state to use the “average”
trade-in value instead of the “clean” trade-in value when
assessing a vehicle’s valuation, thereby lowering the
taxable amount. It also would allow those who already paid
their 2022 vehicle property tax using the current method to
seek a refund.
House Bill 261 and Senate Bill 75 propose using prior-year
values when assessing values in 2022 and 2023.
"We have people who are dealing with a higher cost of living
because of all the impacts of the coronavirus,” Sen. Jimmy
Higdon, R-Lebanon, said in a news release about his bill, SB
75. “They don't deserve to have to pay more on this tax
because of a situation out of their control."
HB 261 further proposes limiting future taxes, starting in
2024, by only taking into account up to a 6% rise in
assessed value for taxation purposes, even if that
percentage is actually higher.
Similarly, Senate Bill 70 would limit taxes on appreciating
vehicles by only taking into account up to a 5% rise in
assessed value for taxation purposes.
Auto values can be appealed to the PVA
Colleen Younger, Jefferson County's property valuation
administrator, said she didn’t have data on how much more
the average vehicle owner stood to pay, but she offered an
example of one of the most in-demand vehicles.
In 2020, a 2019 Toyota Corolla was valued at $13,450. Last
year, it dropped to $12,900 but this year skyrocketed 48% to
$19,050.
Based on a Jefferson County average of $13.50 in taxes per
$1,000 of value, that means the tax on the Corolla last year
would have been $174 compared to $257 in 2022.
Younger said she welcomes legislative action to help
taxpayers, as under state law, motor vehicles must be
assessed and taxed yearly.
“I think any time you have an erratic market, whether in
motor vehicle or real property, there should be some type of
circuit breaker solution to dealing with the erratic market
and how it stands to hurt taxpayers,” she said.
State law allows for appeals to the PVA, within 60 days of
receiving the notice of renewal. Such notices are typically
sent the month before renewal is due, which is the owner’s
birth month, according to the Department of Revenue.
Younger encouraged vehicle owners to appeal if they have
vehicle damage that would lessen its value or if they drive
more than 10,000 miles a year, as standard valuations are
based off that marker.
“But it’s up to the automobile owner to substantiate any
kind of high mileage, damage or mechanical defect," she
said.
Her office is readying a campaign to alert vehicle owners
that they can appeal their valuation. Individuals can appeal
by bringing supporting documentation to their local PVA
office. Younger said there are plans to roll out a service
for Jefferson County citizens to appeal online in the coming
weeks.
Jefferson County residents can contact the PVA office at
502-574-6450. A list of PVA offices statewide can be found
at jeffersonpva.ky.gov/community-links/kentucky-pva-offices/.
Bauer said he was pleased to hear vehicle valuations are
able to be appealed and heartened that state legislators may
address the issue, though he plans on paying the tax as
billed. |
NOTE: In accordance with Title 17 U.S.C. section 107, this
material is distributed without profit or payment to those who have expressed a prior
interest in receiving this information for non-profit research and educational purposes
only. For more information go to:
http://www.law.cornell.edu/uscode/17/107.shtml
Citizens for Limited Taxation ▪
PO Box 1147 ▪ Marblehead, MA 01945
▪ (781) 639-9709
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