Senator Chap Petersen (D-Fairfax) has introduced legislation for the 2016 session that will eliminate the car tax for vehicles used by individuals, and simultaneously allow localities to enact a local fuel tax to restore lost revenue.
The legislation is intended to be “revenue neutral” while improving the efficiency and fairness of collecting local taxes.
“The car tax has become the most complicated, confusing, and convoluted tax schemes we have in Virginia,” Petersen said from his law office in Fairfax City. “Repealing the car tax and replacing it with a local fuel tax would more equitable to car owners and car dealers, and would eliminate the bureaucratic mess required to enforce the tax.”
Currently the government must track a vehicle as it moves though jurisdictions and different owners, it must assess the value of the vehicle, it must calculate the rate by which the vehicle is taxed based on the locality.
The locality must then send a tax assessment to the vehicle owner.
In the form of car tax relief enacted during the administration of Governor Gilmore (1998-2002), the Commonwealth appropriates funds to each locality to cover a portion of the taxpayer’s burden through a complicated formula that weighs the number and value of vehicles in each jurisdiction.
“The car tax is just too complicated to enforce fairly,” Petersen said. “Car dealers are moving their inventory around to different jurisdictions to game the system, and ordinary people such as myself are paying hundreds of dollars on a car that may be unused.”
Local fuel tax revenue will be used to replace car tax revenue in the locality from where the funds were collected.
Counties, cities, or towns would be initially limited to enacting a five cent per gallon fuel tax increase.
Any necessary supplement to “hold harmless” localities currently reliant on car tax revenues would be through the current state appropriation of $950 million to localities for car tax relief.
Petersen’s constitutional amendment to ban the car tax is SJ 47. His bill to allow localities to implement a local fuel tax is SB 244, which has a delayed effective date of January 1, 2019, and is contingent on the passage of SJ 47.
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