JACKSON – The cost of car tags will increase up to 45 percent, or hundreds of dollars in some cases, the three-member state Tax Commission decided Tuesday.
Because of declining car sales, the commission reduced the amount of the money the state will provide to local governments to lower the cost of car tags.
Some legislators stressed that preventing the increase from taking effect will be crucial when they reconvene the 2009 session, probably in May.
“Solving the car tag issue will be a top priority,” said Sen. Eric Powell, D-Corinth. “I feel like on the Senate and House sides it will be.”
Currently, the state provides funds for local governments to reduce the cost of car tags 5.5 percent of the assessed value of the vehicle. It is called a tax credit.
That tax credit was reduced to 3 percent Tuesday by the Tax Commission, beginning July 1.
Lee County Tax Collector Leroy Belk Jr. said that on a car with an assessed value of $3,500, such as a 2002 Cadillac Escalade, the cost of a tag in Lee County will go up $76. For a 2008 Lexus, the cost of the car tag will jump from $629 to $823.
“It won’t be pretty,” Belk said.
In a statement, the Tax Commission said it is required by law to reduce the amount of the state credit provided to local governments.
Under state law, a portion of the tax on the sale of vehicles is placed in a car tag reduction fund. Proceeds from the fund are reimbursed to the local government to reduce the amount of car tags.
Because of the economic downturn, car sales have dropped dramatically, resulting in less money in the car tag reduction fund and now a reduction in the amount of the credit to the local governments.
Belk said the Legislature was warned of the problem in January, but it has yet to take care of it.
“I couldn’t be more disappointed with the legislative process than I am on this one issue,” Belk said. “It’s not like it blindsided them. They knew. I hope and pray they do something.”
Senate Appropriations Committee Chairman Alan Nunnelee, R-Tupelo, said the Tax Commission’s action “was appropriate given the current financial situation.”
But he expressed optimism that the revenue generated from an increase in the cigarette tax can be plugged into the fund to hold down the costs of car tags.
Legislation was passed and signed into law by Gov. Haley Barbour to divert $25 million to the car tag reduction fund, but it is contingent on the passage of a cigarette tax increase.
Thus far, Senate and House negotiators have not been able to agree on how much to increase the cigarette tax.
In a prepared statement, Lt. Gov. Phil Bryant, who presides over the Senate, said, “I have been warning since January about this dramatic increase in the costs of car tags. That is why the Senate Finance Committee has proposed using the revenue from a reasonable cigarette tax increase to offset the soaring price of car tags.”
Finding more money
Rep. Bobby Moak, D-Bogue Chitto, one of the House negotiators on the cigarette tax issue, said an agreement has been reached on how to deal with transferring additional money to the car tag reduction fund.
He said the key is reaching agreement on the amount of the cigarette tax increase.
Rep. Percy Watson, D-Hattiesburg, the lead House negotiator, said the Senate has not been willing to increase the tax enough to accomplish the twin goals of reducing smoking and generating much-needed funds to deal with a number of issues, including replenishing the car tag reduction fund.
The Senate position has been that if the cigarette tax is increased too much, people will buy them out of state.
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Bobby Harrison/Daily Journal