Commission votes to shrink Miss. car tag discount

Published 9:59 pm Wednesday, April 15, 2009

Mississippi car tag prices will increase this summer anywhere from a few dollars to a few hundred dollars, unless there is last-minute intervention by state lawmakers.

The state Tax Commission voted Tuesday to decrease the discounts people receive for tag renewal for the year that begins July 1.

Some lawmakers want to increase the cigarette tax to head off the higher tag prices. Others say there may be different options to pump cash into a fund that gives drivers a price break on the annual tag renewal.

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“The situation with the car tags is on our minds every day,” House Speaker Billy McCoy, D-Rienzi, said Tuesday. “I wish I could tell every taxpayer in our state that it’s on our mind.”

The 1994 Legislature created car and truck tag discounts by increasing the sales tax rate for vehicles. They made a fund to hold a portion of the 5 percent vehicle sales tax. Money from the fund is diverted to counties to replace local taxes lost because of the tag-renewal discounts.

The formula worked when the economy was healthy. Vehicle sales have decreased during the recession, and the tag discount fund is running short of cash.

The price of car tags varies widely in Mississippi, depending on where people live and what kind of vehicles they drive. However, the amount of the annual discount does not vary by location. It depends only on the value and age of the vehicle.

State Tax Commission spokeswoman Kathy Waterbury made a chart showing how Tuesday’s decision will affect drivers’ costs for car tags, beginning July 1. It shows:

— For a 2009 vehicle valued at $20,000, the current tag discount is $297 and the upcoming discount will be $162. That means the driver would pay $135 more to renew the tag.

— For a 2004 vehicle valued at $20,000, the current tag discount is $99 and the upcoming discount is $54. That means the driver would pay $45 more.

— For a 1999 vehicle valued at $20,000, the current tag discount is $5.50 and the upcoming discount is $3. That means the driver would pay $2.50 more.

State law says the Tax Commission must set the tag discount rate by May 1 of each year. Waterbury said legislators could alter the law to change the May 1 deadline; that would allow the commission to reset the tag discount if lawmakers find a way to pump more money into the tag reduction fund.

Legislators are in recess for several weeks and will return to the Capitol in May or June to finish writing a state government budget for the coming year. They also plan to finish working on other issues, including the proposal to increase cigarette taxes.

Lt. Gov. Phil Bryant, who presides over the Senate, said Tuesday he hopes House leaders will consider the Senate’s proposal to funnel part of a cigarette tax increase into the car tag reduction fund.

“I have been warning since January about this dramatic increase in the costs of car tags,” Bryant, a Republican, said in a statement.

McCoy said increasing the cigarette tax is one option to prevent the increase in tag prices. He said lawmakers are looking for other options, as well.

“This is a major situation that is upon us right now,” McCoy said. “We’ll deal with it.”