At least once a year, Virginians come home to a letter in the mail from their county government, telling them how much in personal property tax they must pay simply for owning a vehicle.
It is time for this regressive taxation to end.
Virginians are estimated to pay the second-highest amount of taxes in the nation for owning an asset that basically is a requirement in modern life.
Just how big of a deal is it? On average, Virginians pay $966 a year in vehicle-related taxes. The average family is paying $80 a month simply to go to work and pick up groceries in Virginia.
Furthermore, the extent to which the commonwealth hides this egregious, unnecessary tax is stunning. A car is often the second-largest asset we will own. And yet, the best information we are offered about taxes at the time of purchase is, “You’ll get the bill in the mail.” Huh?
How are Virginians supposed to undertake responsible financial planning when there’s no clear and accurate tax reporting prior to purchase?
Yes, you can Google it — sort of. Each jurisdiction sets its own tax rates, but good luck figuring them out, or, for that matter, finding the information on each county’s website.
To add insult to injury, Virginians also pay a 4.1 percent sales and use tax when buying a car.
More frustrating, the personal property tax on cars disproportionately affects the lower- and middle-class Virginians least able to afford it. Those living paycheck to paycheck must be stunned when they get hit with a yearly personal property tax bill for hundreds of dollars. I think if we knew up front how much we would pay in taxes simply to own a car, there would be mass protests. So we get stuck with the bill after the fact, when it’s too late to complain.
Why do we grin and bear it?
Allow me to play a thought game: Thousands of low-income Virginia families live in rural areas with no public transportation options. They require cars to get to work. But owning cars requires paying the government hundreds of dollars a year — often much more than a week of work at minimum wage. At what point do you think some workers opt out of the labor market and choose welfare? Why are we sticking a giant, opaque disincentive sticker on gainful employment?
A few changes could offer more transparency in our tax laws. The state could require dealers to disclose the first year’s personal property tax and the sales tax for each vehicle. And online calculators for each jurisdiction should be easily accessible.
But those ideas don’t solve the issue of the regressive tax; they offer only better financial planning options for Virginians. We should get rid of the personal property tax on cars entirely and stick with a sales tax.
Of course, this would require replacing the lost revenue with other taxes. My suggestion, which should be palatable to all parties: Pay for part of the lost revenue with a consumption tax (perhaps even an increased sales tax), a GOP favorite, and pay for the other part with an increase in marginal tax rates for high-income earners, a Democratic favorite.
This idea would offer tax relief to lower- and middle-class families on whose backs our state’s budget should not be balanced, remove any disincentives to owning a car and offer a fair replacement for the lost tax revenue.
It’s time for Virginia to drive a better bargain.