Auto tax talk shows lack of forethought

NO doubt it’s welcome news to Oklahomans who need a new or used vehicle that some lawmakers are considering repeal of the automobile tax increase approved in 2017. But the reasons cited for the change of heart highlight how lawmakers failed to think things through in the first place.

From 1935 to 2017, car purchases were exempted from state sales tax. Instead, a 3.25 percent excise tax was imposed, which is lower than the state’s 4.5 percent sales tax rate. In 2017, lawmakers voted to add a 1.25 percent sales tax on top of the excise tax.

Now two legislators — Senate Majority Floor Leader Kim David, R-Porter, and Sen. Julie Daniels, R-Bartlesville — have filed bills to repeal the 1.25 percent auto sales tax.

Some supporters of the tax increase suggested the higher price would have no meaningful impact on consumers. That was always dubious. While some people can afford to shrug off hundreds of dollars in additional cost, for many working families the extra expense necessitates choosing a cheaper vehicle to offset the higher tax cost. And in some cases, the higher expense quickly drove purchases out of state.

Within months of the tax’s passage, a House leader announced he would author legislation to exempt the trucking industry from the new tax and Gov. Mary Fallin added that change to a special session call. The aboutface occurred due to reports that transportation companies with national fleets were shifting activity to other states. That meant the state was losing tax collections on those sales, not increasing associated revenue.

Ultimately, lawmakers didn’t approve the exemption, citing a lack of data. That highlighted the short-sighted approach taken in approving the tax in the first place since it was enacted despite that same lack of valid data.

Lawmakers also discussed exempting various other groups, including disabled veterans and farmers. David now argues it makes more sense to eliminate the tax than riddle it with loopholes.

The tax is excessive compared with other states and puts Oklahoma at a disadvantage, according to Rose Morgan, executive director of the Oklahoma Independent Automobile Dealers Association. Oklahoma is one of just eight states that taxes vehicles based on the full price. Go to a neighboring state to buy your car, and tax will be applied only to the tradein difference. One suspects many Oklahomans within driving distance are now going to those states to buy autos at a lower price. Morgan said Oklahoma dealers are “complaining about how slow things are” due in part to the tax.

Daniels, who opposed the tax increase in 2017, calls it “double taxation of an expensive purchase for the vast majority of Oklahomans.” David, who supported the tax hike, now concedes to the Tulsa World it’s a “pretty regressive tax on people who need a vehicle to get to work.”

It’s encouraging that lawmakers are reconsidering a policy decision as accumulating data suggests the policy was a mistake. But it would be far better if legislators carefully studied policies before approving them. As the past few years of state budget chaos have shown, an “act now, plan later” approach produces additional problems more often than sound solutions.