Driving home the tax burden

In this economy, a paid-off pickup is worth more than any showroom stunner. Consumers and businesses are cutting back, newly committed to driving their cars longer. Demand for vehicles has dried up.

"We've never seen it this way in our lifetime," dealership owner Jim Marsh told the Review-Journal last week. "Even the used car market has gone soft."

The car advertisements in this newspaper show prices that have fallen through the undercarriage. Just about anything with four wheels is worth much less than it was only a few months ago.

So everyone in the car business is making deals.

Except at the DMV.

The recession has given motorists one more reason to loathe the government monopoly. Like some Kremlin commissar, the DMV taxes you based on what it says your vehicle is worth, not on what you actually paid for it, and certainly not on what the market will fetch.

Nothing kills a bargain-hunter's buzz faster than learning that the registration taxes on that oversized SUV, marked down to $27,000, are fixed at the Manufacturer's Suggested Retail Price of $45,000. Instead of having to write the DMV a check for about $450 for your license plate and registration sticker, you're stuck paying more than $800 -- the equivalent of two car payments.

Ouch.

Now don't give the DMV clerks trouble over this travesty. Your state legislators are to blame for the most unfair and unpopular tax in Nevada. The law that spells out vehicle valuation is a perfect representation of fantasyland legislation -- taxation tied to arbitrary numbers with no basis in reality.

For starters, lawmakers should note that the Manufacturer's Suggested Retail Price includes the word "suggested." That means it's a starting point in negotiations. No one (no one who's smart, anyway) ever pays the full MSRP.

The government services taxes paid by Clark County residents boil down to this: The DMV values a new car at about one-third of the MSRP, then hits you up for 5 percent of that value, which depreciates each year.

The legislators who signed off on the depreciation table obviously never looked at a Kelley Blue Book. According to the state, a vehicle's value drops only 15 percent after one year and exactly 55 percent after five years. On the open market, my 6-year-old sedan is now worth less than 20 percent of its MSRP, but the state is taxing me as though it's worth 35 percent of what General Motors says it should have sold for new.

"It's always been a complaint of drivers that their taxes are based on the MSRP instead of the actual sales price," said local DMV spokesman Kevin Malone. "But it's really the only fair way to do it, otherwise you'd have two people paying different fees on identical vehicles."

The state isn't concerned, however, that the drivers of those two vehicles might have paid dramatically different prices for -- and thus different sales taxes on -- those two vehicles. Nor are lawmakers bothered that the owners of two identical homes, next door to one another, might have disparate property tax bills -- subject to different property tax caps.

Let's face it, vehicle taxes are so flawed they give both liberals and conservatives plenty of reasons to hate them.

Although tax-hiking leftists love the fact that the DMV's valuation scheme gives them a great tool to stick it to the affluent and redistribute wealth, the flip side of that benefit is that it discourages the middle class and poor from driving newer, safer, lighter, more fuel-efficient vehicles that pollute less and cause less damage to our roads. If you buy Al Gore's global warming baloney, you don't want to give people a financial incentive to drive their cars until death do them part -- you want older vehicles off the street ASAP.

Conservatives especially dislike value-based taxes that don't pretend to accurately measure value. That inevitably results in overtaxation.

Whatever your political stripes, Nevada's vehicle registration taxes are lousy public policy. Why do you think so many Nevada newcomers wait years before turning in their out-of-state plates?

With the Legislature's majority Democrats talking about "restructuring" Nevada's tax code, there's no better place to start than the DMV. Last week, the Nevada Policy Research Institute issued a series of recommendations for state government budget cuts and reforms as alternatives to the tax increases so many in the political class are calling for. Among its recommendations: "vehicle taxes should be based on a vehicle's weight, not its age. ... Basing the tax on weight better reflects the damage a vehicle causes to our roads."

That makes a lot of sense. But the best reason to scale back and reform vehicle taxes right now is the dearth of sales at Nevada dealerships. Absurdly high registration fees are just another obstacle keeping consumers away from car lots, no matter how steep the discounts are. Reforming vehicle taxes -- at a minimum, linking them to the actual sales price -- would stir up the sales tax revenues Nevada governments are so desperate for.

That's an argument worth driving home.

Glenn Cook (gcook@reviewjournal.com) is an editorial writer for the Review-Journal.