ATLANTA -- Opposition appears to be building to a bill in the legislature which critics say would hike taxes on used car sales. Backers say the higher tax would close a loophole in the current law.
Backers say this issue goes back to 2013. That’s when the legislature eliminated the so-called birthday tax, an ad valorem tax on cars – and replaced it with a one-time tax. That 2013 tax, backers say, needs fixing
When you buy a new car in Georgia, you typically pay a sales tax based on the price. When you buy a used car, you pay a tax based on the book value of the car. That system benefits used car buyers because that tax rate is typically lower.
Its critics call it a loophole. "What we have done is we have eliminated the loophole," said Rep. Shaw Blackmon (R-Bonaire), the bill sponsor.
That lower tax rate has hurt the treasuries of local governments, say backers of a bill that would tax new and used cars the same way.
"It’s hurting our local public schools, it’s hurting our local communities because the dollars that they would be getting are not being realized," Blackmon said.
The bill would change the way used cars are taxed. It eliminates the current seven percent tax based on the car’s value, and replace it with a seven percent tax based either on the sale price – or the value of the car, whichever is higher. That’s the same system that taxes new car sales.
"This is a massive tax increase," said Paul John of the Georgia Independent Automobiles Dealers Association.
Used car dealers say raising sales taxes on used cars will kill business.
"People are struggling to pay the taxes right now as it is," said Daniel Clemente, who owns R Quality Auto Sales, a used car business in Doraville.
"We won’t be able to sell cars as much as we were able to before," Clemente said
But backers of the bill say it would merely return the tax system to its pre-2013 format, which mirrors every other state in the nation except Georgia.