State considering new car tab tax for King County
March 1, 2013
New: March 1, 2:58 p.m.
By Kylee Zabel, Reporter
WNPA Olympia News Bureau
More taxes to sustain existing benefits are the financial crutch being considered by the Legislature to support public transportation entities in King county.
The House Transportation Committee Feb. 25 heard testimony on a bill that would allow county and/or city officials to increase the Motor Vehicle Excise Tax (MVET) by 1.5 percent, with conditions, to support specific transportation services.
The bill has a companion in the Senate where public hearings conducted by the Senate Transportation Committee attracted similar reactions as the House version.
Under HB 1959, counties with populations of more than one million would be able to impose up to a 1.5 percent MVET by either voter approval or a majority vote of the county council. Sixty percent of the MVET-proceeds would be dedicated to maintenance, operations and other local capital projects regarding public transportation systems. The remaining 40 percent would be used for local roads.
King County would be the only county affected by the legislation, according to population estimates from the state’s Office of Financial Management (OFM) in April 2012.
The bill passed out of the House Transportation Committee March 1.
Scott Hazelgrove of the Washington Auto Dealers Association claimed that car sales are the largest contributor to sales tax revenue in Washington and making it more expensive to purchase an automobile by increasing the tax would hurt vehicle sales.
The tax is paid to the Department of Licensing (DOL) based on the value of a motor vehicle. The value is defined as 85 percent of the manufacturer’s suggested retail price (MSRP) of a vehicle when it was first placed on the market.
So, if you purchase a car for $20,000, the estimated value to which the tax is applied is $17,000.
For subsequent years after the purchase of the vehicle, the 85-percent value is multiplied by the applicable percentage on the depreciation schedule. Thus, the annual tax amount owed decreases each year.
Currently, local authorities may impose a maximum 0.8 percent MVET for high-capacity transportation systems.
Washington had a statewide MVET from 1937 to 2000, until the passage of Initiative 695, which repealed the tax. That cut transportation revenues by $750 million annually, ferries and local transit largely taking the hit.
Speaking about a number of local-option tax and fee bills before the committee, proponents of the two MVET measures urged lawmakers to pass the proposals citing the increase in public- transit ridership since 2008.
Bruce Wishart of the Sierra Club said that ridership increased in the central Puget Sound region by 23 percent from 2005 to 2008. Not addressing this funding concern is a detriment to commuters, especially to the elderly who heavily rely on public transit, he stated.
But there are doubts that an MVET-increase is the best solution to the public transportation funding shortfalls considering the state’s slow economic recovery.
Some are concerned that the MVET may make it even more difficult for low-income commuters, who already struggle to pay transit fares, to have access to jobs, medical facilities and family members.
The bill allows either a local ballot measure or a simple-majority vote of a county council to raise the MVET rate.
The proposal is in conjunction with the Connecting Washington Transportation Revenue Package (HB 1954) introduced Feb. 20 by House Democrats and stakeholders. It would establish, among other revenue sources, a statewide MVET of 0.7 percent.
If this package and HB 1959 were to pass this legislative session, King County residents would be required to pay about 2.5 percent in local and state MVETs combined, which equates to a $20,000 vehicle with a taxable value of $17,000 costing its owner $425.
This transportation revenue package is estimated to raise $10 billion over the next 10 years to fund new projects and maintenance tasks by, among revenue sources, raising the gas tax, implementing more tolls, the MVET, hazardous substance tax and a bicycle sales fee.
$3.4 billion of the $10 billion is to go to local governments for road maintenance, transit funding and other commissions.