Analysis: $10 car tag? Costs debate still waged

Has it really been 34 years since John Arthur Eaves Sr. campaigned for Mississippi governor with a pledge to reduce car tags to $10? Eaves, in his white suit, would stand in the back of his white Cadillac convertible and give a populist stump speech vowing to “stand up” for $10 tags. The pledge piqued voter interest in Eaves — just not enough to get him elected. But politicians’ railing against the high cost of car tags has stayed with us. It took nearly 20 years for anything to be done. In 1994, the tax on the sale of a new motor vehicle increased from 3 percent to 5 percent. The money went into a tag reduction fund at the Mississippi State Tax Commission, and it was earmarked to reimburse local governments. The amount of money in that fund in any particular year is driven by the sale of new cars. In a good economy, motorists have seen on their annual car tag renewal notices a credit that nearly cuts in half what they pay, out of pocket, for the license plate. In bad economic times, such as now, the tag credit falls because new car sales are down and there is less money to send back to local governments. Sen. Hob Bryan, D-Amory, was chairman of the Senate Finance Committee in 1997. He suggested to lawmakers then that the tag reduction fund at the Tax Commission could ultimately run out of money. He proposed a bill that would cap the credit at $500 per tag to prevent a shortfall. Senator after senator railed against the bill, and it was defeated. Twelve years later, the Legislature appropriated $38 million to shore up the tag reduction fund. The issue of high car tags remains unresolved. “I wasn’t so much hung up on the mechanics of how we did it,” Bryan said this past week. “Given where we are, what we need to do is put the tag credit at a fixed dollar amount or a fixed percentage that does not vary year by year based on much sales tax is collected on automobiles. “You can argue about how much it needs to be, but as long as we have this silly scheme this is the sort of thing that is going to happen,” Bryan said, speaking of the shortfall in the tag fund. The cost of a tag depends on the local tax rates and the value of the vehicle purchased. The money goes to cities, counties and schools. That, Bryan said, is the central issue — ad valorem, or property taxes. “Historically, we kept ad valorem taxes on land relatively low, producing relatively higher values elsewhere. Then after court-ordered reappraisal, there was a desire to keep land taxes low. That’s where we came up with the constitutional amendment which intentionally increased the cost of car tags in an effort to keep land taxes low,” he said. Bryan said the percentage of a local tax base — whether it is cars, homesteads, non-homestead real property or farms — varies. “Any attempt on the state level to have a shift or anything like that has a varied result as you go from district to district to district. So you’ve got problems trying to fiddle with taxes at the state level,” he said. The tag credit established by the Tax Commission varies from year to year, which is based in turn on “how much you get from the sales tax on cars,” Bryan said. As explained by the Tax Commission, the tag credit was 5.5 percent last year. The tag credit is multiplied by the assessed value of the vehicle. That is the amount of the car tag reduction. An example used the Northeast Mississippi Daily Journal was that last year on a car with an assessed value of $4,125 multiplied by 5.5 percent produces a credit of $227. The Tax Commission, had the Legislature not provided the additional money, expected a tag credit of 3 percent — the lowest since the formula was put in place. The Tax Commission has set the tag credit at 4.25 percent, which means costs will be about the same.

Jack Elliot/The Associated Press