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End of ad valorem ‘birthday tax’ takes effect in 2013

Local officials unsure how car tax change will affect revenue

POSTED: December 28, 2012 11:59 p.m.

Georgians who buy a new or used car after March 1 will pay a one-time title fee instead of a “birthday tax,” the annual ad valorem tax paid with license tag renewals.

Replacing the ad valorem tax on vehicles was popular with residents and lawmakers alike, but local government officials said they are waiting to see how the new program will work and if the new law benefits them.

The Special Committee on Tax Reform for Georgians and the Association County Commissioners of Georgia worked together on the legislation so counties as a whole wouldn’t lose money on the move, although some may lose or gain revenue, according to the ACCG website.

Replacing the birthday tax, part of a larger reform bill, was a popular move for Georgia lawmakers, state Sen. Butch Miller of Gainesville said. Most calls to lawmakers from constituents are about property and ad valorem taxes. The Republican said House Bill 386 passed unanimously in the Senate.

“People are paying significantly more by paying the sales tax and the ad valorem tax,” he said.

The new fee replaces both the title and sales tax for a one-time 6.5 percent charge on the purchase. The fee will go up to 6.75 percent in 2014 and 7 percent in 2015. Those who have bought or will buy a car between Jan. 1, 2012, and Feb. 28 next year can opt into the new program and pay either the sales tax or the title fee.

Those who already own a car will continue to pay the ad valorem each year with their license tag renewals.

People who buy a car from an individual also are subject to the new upfront title fee. Buyers pay the fee when they register their vehicles and apply for the title with the county. The reform doesn’t affect the annual $20 tag fee drivers still will have to pay, said Keith Echols, Hall County tax commissioner.

Area tax commissioners aren’t yet sure how the new rules will work. Echols and his staff will go to training sessions as the law is implemented early next year, he said.

“It’s not set in stone yet,” Echols said.

An August post on Gov. Nathan Deal’s blog said the new program will be phased in over 10 years.

Little in the law, except a bit more reporting duties, will affect car dealerships, said Miller, who is general manager of Milton Martin Honda in Gainesville. Taxing personal sales between individuals won’t impact dealer sales, either.

“I don’t think dealerships really compete with personal sellers,” he said.

In Echols’ opinion, the county may collect less revenue in the long run because of the change.

“The county will benefit to start with,” he said.

The new law will encourage everyone to go out and buy a car right now, Echols said. But in a couple years, there probably won’t be as many purchases.

“In my opinion, the county won’t have as much money coming in,” he said.

The state and local governments will split the funds from the new title tax, with local governments guaranteed a base amount of $1 billion, plus 2 percent growth per year through 10 years. The state takes a larger percentage of the funds initially because the ad valorem tax will still be collected on vehicles. The local tax share starts at 43 percent in 2013 and rises to 72 percent in 2022.


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